Jobs Number Should Be Good but Is It Downhill From Here?
Employers have been more willing to add workers, but the trend is unlikely to improve much more in coming months and, in fact, the employment picture may deteriorate.
December’s jobs report, however, is expected to reinforce what appears to be a clear improvement in hiring, while still at a sluggish level. Economists are expecting nonfarm payroll growth for last month of about 155,000, when accounting for layoffs of roughly 25,000 public sector workers.
That compares to 120,000 in November, when the unemployment rate was reported at 8.6 percent. Economists expect unemployment to creep back up to 8.7 percent as more workers look for jobs.
“Tomorrow’s number should be pretty good,” said Goldman Sachs economist Andrew Tilton, who notes that job advertising and other indicators show an improved hiring picture. Weekly jobless claims, reported at 372,000 Thursday, continue to decline.
“In general, economic growth looks like it’s been a bit better in the last two to three months, so that’s generally correlated with hiring. Weather was very mild so that would tend to help things like construction hiring,” said Tilton. Goldman Sachs economists’ forecast of 175,000 nonfarm payrolls is among the highest for the December report, which will be released at 8:30am ET Friday.
“I wouldn’t be surprised to get a pretty strong report in January” also, he said. “We’ve had low layoffs relative to where we were for the last few years. I would think the January report would be reasonably good and the economic data have been pretty good.”
But that trend could be overtaken by a weakening economy. “We’re reasonably cautious about first -half economic growth,” he said. “On average, for the year, we expect employment growth to be somewhat lower than we expect in this (December) report.”
Mesirow Financial chief economist Diane Swonk expects to see 155,000 jobs added to December nonfarm payrolls and an unemployment rate of 8.8 percent. “It’s a particular wild card this month because they are doing annual revisions of seasonal factors,” said Swonk, who notes the adjustment could add an unexpected boost for the numbers.
She too expects the December report to be better than those in some of the coming months, as Europe’s debt crisis continuesand Washington budget and tax talks come back into focus.
“I’m looking at a slowdown in growth as we move into 2012 from the fourth quarter… we’ve gotten an uneven recovery that’s accelerating. That’s kind of like ‘a glass half full,’” she said. “I think we’re going to have some rocky months ahead. I think we’re going to have a slowdown in growth in the first half of the year with Europe still volatile, wreaking havoc on the stock market. Keeping volatility high just keeps people gun shy from hiring more.”
“If we can get between 100,000 and 200,000 (monthly nonfarm payrolls) for the whole year, that would make me extremely happy,” she said.
Economists are mostly dismissing the ADP report for December, which showed that 325,000 private-sector jobs were added. The report is impacted by seasonal factors and has been overinflated in December before. But Swonk said an important element of that report showed that more than 80 percent of the new jobs were from small business, a trend that was also apparent last month.
“That’s good news and that story continues to grow,” she said. “I think that’s very important, and it’s one we want to keep momentum on, and that’s small business formation … That’s seen a real turn.”
On the negative side, the layoffs of public workers continues and now it’s shifting back to the federal payroll as opposed to state and local government workers.
“We’ve got postal workers. We’ve got veterans. We’ve got defense coming,” she said. She estimates 25,000 public-sector layoffs will be included in the December employment report.
Credit Suisse economist Jonathan Basile said an area that may show improvement is transportation, reflecting holiday hiring by parcel-delivery services. “They hire massively in December and then they cut that workforce in January,” he said.
He expects to see a total of 150,000 nonfarm payrolls. Basile does see a positive in the unemployment claims, and he notes the weekly number is more closely tied to the employment report than it has been in the past. The number has been below 400,000 for the past month.
“When you dip below 360,000, it’s really in solid positive territory for jobs. It really diminishes the chances that jobs cuts are on the table,” he said.
Improvements in the jobs report has already come as the unemployment claims dipped. “It wasn’t the hiring side that was doing the work. It was the firing side,” he said.
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