Published: February 3, 2012
The front wheels have lifted off the runway. Now, Americans are waiting to see if the economy can truly get aloft.
With the government reporting that the unemployment rate and the number of jobless fell in January to the lowest levels since early 2009, the recovery seems finally to be reaching American workers.
The Labor Department’s latest snapshot of the job market, released on Friday, makes clear that employers have been hiring more in recent months, with 243,000 net new jobs in January. The unemployment rate now stands at 8.3 percent, down from 8.5 percent a month earlier and from 9.1 percent as recently as last August.
Economists were encouraged, though they expect some fits and starts along the road to recovery.
“I do think we’re at the point where we’re in a self-sustaining, positive reinforcing picture,” said Stuart G. Hoffman, chief economist for the PNC Financial Services Group.
Stocks rallied on the brightening outlook, reaching multiyear highs.
The report revealed job gains not just for the last month but for previous months. December job growth was revised to 203,000, from the original 200,000. The job gains for November, originally 100,000 jobs, were revised upward to 157,000, creating a picture of a job market that has been gathering steam.
The private sector remained the engine of growth. While federal agencies and local governments continued to lay off workers, businesses added 257,000 net new jobs in January. The biggest gains were in manufacturing, professional and business services, and leisure and hospitality.
Despite the promising numbers, various indicators create an ambiguous picture of the overall economic recovery.
Layoffs appear to be slowing as fewer people are filing claims for unemployment benefits, and factory orders have picked up.
Small businesses, though, are still not hiring much. And while sales of existing homes have started to rise, home prices continue to fall. Incomes are not growing and consumer spending is still restrained, and could come under further pressure with gas prices edging higher in recent months and as consumers revert to building up savings.
Seasonal factors may have inflated January hiring numbers in some industries, like restaurants or construction.
Steve Blitz, senior economist for ITG Investment Research, said the report nevertheless revealed strong increases in manufacturing and related job categories, like transportation and warehousing and wholesale trade. “You’ve got to give credit when things are moving in the right direction,” said Mr. Blitz, who has been cautious in heralding a recovery. “This is not a process that is going to be done in a month or two months or a year. It could take five or 10 years to get there.”
Others were unconvinced that the recent pace of job growth would be sustained, pointing to moderate consumer spending and mild economic growth, 1.7 percent last year.
“The problem is that there is this bifurcation here in the numbers,” said Bernard Baumohl, chief global economist at the Economic Outlook Group. “On the one hand we see rather impressive job growth, but on the other hand we’re also seeing other economic indicators that are telling us that the economy is fundamentally weak.”
Mr. Baumohl added, “We’re going to have to really very carefully dig deep below the surface for these and a lot of other economic statistics to find a consistency of what is happening in the U.S. economy.”
The unemployment rate appeared to be falling because people were genuinely securing jobs rather than merely leaving the work force. The Labor Department adjusted its data to account for new population estimates from the 2010 Census.
Accounting for those adjustments, the labor force had a net gain of 250,000 people in January from a month earlier. Although the pool of unemployed people has been shrinking, the number remains high — 12.8 million — about equal to the population of Pennsylvania, and long-term unemployment is one of the most crushing legacies of this recent recession. For January, the Labor Department reported that 5.5 million people had been out of work for six months or more, about 43 percent of the jobless.
And according to an analysis of December’s job numbers released this week by the Pew Fiscal Analysis Initiative, nearly a third of the jobless have been unemployed for a year or more.
Underemployment is another stubborn problem. The number of people working part time because they cannot find full-time work was 8.2 million in January. Including that group and the 1.1 million who stopped looking for work altogether, and the broader measure of unemployment was 15.1 percent.
“You have an interesting situation where you have some permanent part-time workers,” said John Silvia, chief economist at Wells Fargo. “These people are in jobs and the jobs are not likely to become full time.”
Sandy Pochapin, a 54-year-old former marketing manager, was laid off for the second time last May from a small business in Newton, Mass. Just before the start of the year she picked up a part-time job as a media consultant at an advertising agency. Her husband, a real estate lawyer, has also experienced severe cutbacks in his income.
The couple, who are now paying three times what they were paying for health care before Ms. Pochapin lost her job, have cut back on dinners out, and she said that replacing her eight-year-old Toyota Highlander was “not in the cards.” More painfully, the couple have dipped into their college-age son’s educational fund to keep up with mortgage payments and other expenses.
Ms. Pochapin, a member of several networking groups, compiles job leads and recently sent out a list with more openings than she had ever seen. “I would say things are picking up,” she said. “But where they’re picking up is not where people who have been unemployed long term have skills.” She noted many openings for jobs in mobile marketing and for digital media specialists.
Indeed, one of the perennial complaints of employers is that they cannot find qualified workers. Ancestry.com, a genealogy Web site in Provo, Utah, has openings for 150 engineers, data mining specialists and developers of mobile apps. “While we find a lot of people who are unemployed,” said Eric Shoup, a senior vice president, “they are not the people who bring the skill sets we need for our business.”
He said the company did virtually all its hiring away from other companies.
Economists are beginning to worry about the self-fulfilling nature of long-term unemployment. “It’s almost starting to look like there are two job markets,” said Cliff Waldman, the economist at the Manufacturers Alliance, a trade group. “Long-term unemployment is very sticky.”