December Chill: Employers Cut 85,000 Jobs
A Bloomberg News economists survey had forecast the economy would add 10,000 jobs in December and the unemployment rate would rise to 10.1% from 10% in November.
Meanwhile, a separate unemployment gauge, which includes workers who can find only part-time work and discouraged workers, rose to 17.3% in December from 17.2% in November.
Bright Spots in Poor Report
However, while December's 85,000 job loss was a disappointment, there were a couple bright spots in the report.
First, temporary jobs, which usually signal a new hiring phase, increased by 47,000 in December. Since July, the temporary job category has added 166,000 jobs.
Second, average hourly earnings rose three cents to $18.80. However, both total hours worked and and the average workweek (at 33.2 hours) were flat.
In December, the goods-producing sector lost 81,000 jobs, including 27,000 manufacturing jobs; construction lost 53,000 jobs; and retail shed 10,000. Areas that added jobs included education and health care services, up 35,000; and professional and business services, up 50,000.
All Eyes on Job Market
More than one political future -- and perhaps the public policy direction of the nation, itself, as it begins the new decade -- rests on job growth.
Of course, international events or a major scandal can always intervene, but as of now, job growth and reducing unemployment after the worst recession since the Great Depression is the nation's No. 1 problem. Political science and public policy survey research indicates that during periods of high U.S. unemployment, if the party in power in Washington, in this case President Obama and congressional Democrats, does not solve the problem of a lack of jobs or reduce unemployment, Americans will vote that party out of power in November.
Obviously President Obama isn't up for reelection in 2010, but House and Senate Democrats are, and their party's majority status will likely hinge on its ability to get the "great American job creation machine" rolling again. If the party is able to do this, it will retain its majority in each chamber. If it doesn't, the Republicans will gain seats in each. Further, if little progress is made on the jobs front, there's even an outside chance the GOP could win enough seats to take control of the House.
And the latter would effectively end the Obama legislative era, which is why investors and job seekers alike can rest assured that decision makers in Washington will be doing everything possible to create an environment conducive to job growth. Based on December's disappointing job report, the Democrats have a lot of work to do to retain their majority-party status.
Investors should keep in mind that the U.S. Labor Department's monthly job total is subject to revisions as the U.S. government receives more information -- revisions that are sometimes as large as 100,000 jobs. That said, the December job report was a disappointment -- even with the November revision showing a small increase and the unchanged U.S. unemployment rate. More than 7.6 million jobs have been lost since the recession started -- an enormous reduction in production capacity and earnings power that will take years to overcome. Hence, the sooner the nation returns to sustained job growth, the better -- for both stock market gains and national well being.
Also, don't expect the U.S. Federal Reserve to change monetary policy after a month of solid job gains. In the minutes from their most recent meeting, Fed governors indicated that more than one good jobs report would be needed to convince them that the job market is recovering.