Diane Swonk, Chief Economist
Feb. 5, 2010 – 8:00 a.m. CT
Close to a Tipping Point on Employment
Firing continued to outpace hiring by 20,000 jobs in January, while the unemployment rate edged DOWN to 9.7%. Moreover, we started to see some increases in a few categories of employment – retail, service-providing jobs and, somewhat surprisingly, in manufacturing – while hours worked and weekly earnings improved, which suggests that we are close to a tipping point on employment. Employers tend to work their current employees harder and add overtime before they actually commit to new hires.
The payroll data and the unemployment rate come from two separate surveys, which explains some of the divergence in the data. The drop in the unemployment rate was particularly surprising, as it was predicated on households reporting an increase in employment. This could be capturing the self-employed doing slightly better than they had been, but it is still puzzling.
Separately, revisions to 2009 suggest that we lost significantly more jobs than previously thought – 1.2 million more people lost jobs during the recession – which shouldn't be a surprise, given the depth of the contraction in the overall economy.
The Bottom Line: The recovery that we began to see in the summer of 2009 continues, and we will soon reap some benefits in terms of jobs. That said, the jobs recovery is expected to remain muted and the economic recovery is still subdued relative to those of the past. Moreover, fiscal stimulus has played – and will continue to play – a key role in reversing losses in the U.S. economy, and helped to lay a foundation for some sort of recovery in the jobs picture.
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