Private Sector Improves Jobs Picture Only Moderately

The United States economy ended the year by adding 103,000 jobs in December, the Labor Department said Friday, a number that missed expectations and suggested that job growth could continue to hinder a recovery.
In addition, the unemployment rate fell to 9.4 percent last month from 9.8 percent, its lowest rate since July 2009, in part because many Americans gave up looking for work.

The agency also revised estimates from the two earlier months, now saying that 210,000 jobs were created in October instead of 172,000, and 71,000 in November, instead of 39,000.

As with previous months, all of December’s gain — 113,000 jobs — came from private employers.

Federal, state and local governments continued to shed jobs — cutting another 10,000 last month after trimming 8,000 in November, revised from 11,000 — mostly on the local level. States and municipalities dealing with tighter budgets may be faced with further cuts as they try to shrink their deficits.

Since December 2009, the agency said, non-farm employment has increased by 1.1 million, or an average of 94,000 a month.

While the overall job picture showed improvement, the monthly growth was not enough to significantly reduce the ranks of the unemployed or keep pace with people entering the work force. The outlook remains bleak for many workers. More than 14.5 million people were out of work in December, among them 6.4 million who have been jobless for six months or longer.

Jeffrey N. Kleintop, chief market strategist at LPL Financial, said the report was “not terrible” once revisions were taken into account.

“But there is no real job creation here,” he added, noting that the increases in jobs were mostly in the temporary help, education and health care, rather than some of the crucial sectors like manufacturing and technology.

“It just shows business leaders are just not yet willing to commit to long-term growth projects,” Mr. Kleintop said.

Economists also pointed to other signs of a turnaround, though their outlook for 2011 remained varied.

“The U.S. economy finally appears to be picking up steam and headed toward recovery,” said Steven Blitz, a senior economist for ITG Investment Research. “Several economic indicators — including manufacturing and services output, and sales of cars and consumer goods — have shown noticeable improvement over the last few months.”

The economy is predicted to have grown at least 3 percent in the fourth quarter, with estimates even higher for the 2011. Goldman Sachs and Morgan Stanley, for example, have forecast growth of 4 percent for this year.

Economists noted that manufacturing, consumer confidence, capital spending, and claims for first-time jobless benefits were among the data that have generally been improving in recent months, though December’s retail same-store sales reported this week were weaker than expected.

Personal income and consumer expenditures were higher, while the savings rate declined during the year.

“The figures clearly show that with demand for goods and services increasing, employers have far less justification to cut their payrolls,” said Bernard Baumohl, the chief global economist for the Economic Outlook Group, in a research note.

The question, Mr. Blitz asked in his research note, is whether the labor market will keep pace with other economic growth “or will high unemployment be an enduring feature of the United States’ economy?”

In Washington, Congress returned to work this week, and Republicans, who have taken control of the House, have promised to make the economy and job creation a priority. Last month, President Obama and Republican lawmakers reached a compromise that extended tax cuts to all Americans and included $57 billion for unemployment insurance, a bipartisan effort that underscored the urgency felt by the administration and by lawmakers in both parties to prop up the still-struggling recovery.

On Friday, President Obama is expected to announce several additions to his economic team, including Gene Sperling to replace Lawrence Summers as director of the National Economic Council, White House officials said. The president will make the announcement at a window-manufacturing company in Landover, Md. The company, which makes energy-efficient windows and doors, recently expanded and hired new workers as a result of tax credits created by Mr. Obama’s policies.

Economists generally estimate that the economy needs to add more than 120,000 jobs a month simply to absorb newcomers into the labor force, a pace that employers fell behind last year.