The good news is the economy is regaining its health. The bad news is it’s happening slowly. The worse news: That slow pace is here to stay.
In October, employers added 80,000 workers to their payrolls. That was slightly worse than the 100,000 rise in jobs that economists had been expecting. So another disappointing jobs report, right? Not quite. Despite the low number the unemployment rate dropped to 9%, from 9.2% the month before. That’s not all. It appears job growth in September and August was better than we previously thought. According to the Bureau of Labor Statistics, the economy added about 100,000 more jobs in the past two months than the BLS had previously thought. All told, it means that on average the number of jobs has increased 153,000 per month so far this year. That’s up from average employment growth of 98,000 a month in 2010. James Paulsen, chief investment strategist at Wells Capital, says those numbers prove that there is little chance the economy will dip into another recession, which was something many were predicting just a few months ago. “The revisions show that the economy was not as weak as we thought, and that it started to improve earlier than we thought,” Paulsen says.
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What’s more, some of the troubling trends in the job market appeared to have improved somewhat. The number of long-term unemployed (out of work for more than 27 weeks) dropped by 366,000. The number of people employed part-time because they couldn’t find a full-time job also dropped by another 374,000. In addition, about 252,000 fewer people counted themselves as discouraged, meaning they have stopped looking for work. Put that all together, and that’s nearly 1 million people who had better jobs prospects in October than they had a month ago.
That said job growth continues to be surprisingly slow. And while the unemployment rate did fall this month, economists say at this rate that won’t continue. Typically, we have to produce nearly 200,000 jobs to bring down the unemployment number. But recent data suggests that bar might be falling. With fewer people in the job market than before the recession, and more and more baby boomers retiring, economists say the magic number may be more like 120,000 a month to bring down the unemployment rate. That’s good news for the nation’s psyche and Obama.
Still, what is unusual about this recovery is that even as the economy is improving there doesn’t seem to be an increase in the pace of improvement. In other job market rebounds, one month’s 100,000 jobs gain leads to 200,000 the next month. Every new person with a job spends more money and that typically leads to more and more jobs. But that’s not happening this time around. The reasoning at this point is familiar. Debt has curtailed spending. That’s really true in the housing sector. Home construction typically leads the economy out of recession. But with prices still falling and foreclosures continuing, home buying has not picked up. In fact, in October the number of construction jobs fell by 20,000.
But while not heating up, the recovery, albeit slow, has shown staying power as well. Consumers and companies are spending again. The emerging economies and a weak dollar, for now, has boosted exports. Nigel Gault, chief U.S. economist for forecasting firm IHS, says he isn’t expecting anything great from the economy, but he also says we would need some major shock to push us back into recession. Unfortunately, particularly for the 13.9 million people, that’s the type of good news we are going to get in a recovery like this. But it is good news nonetheless.