With the Labor Department’s announcement today that the U.S. economy added 155,000 jobs in December and that the unemployment rate held steady at 7.8%, one comes to a depressing realization: the average monthly job creation in 2012 of 153,000 jobs was exactly the same as it was in 2011.
Depending on whom you ask, this number is either right around what is needed to keep up with the growth of the labor force or a touch above it. In other words, for two years of economic recovery, the labor market in the U.S. has been doing only slightly better than treading water, and much of the improvement in the unemployment rate can be attributed to people dropping out of the labor force either because they’ve given up looking for work or because they’ve retired.
This isn’t to say that today’s report is bad news. The numbers show slight upticks in manufacturing employment, the average length of the workweek, and even a 7-cent rise in average hourly pay for workers. In addition, employment gains in November were revised upward in this report by 15,000 jobs. Also, this report is measuring the month of December, which was during the height of the fiscal cliff showdown, an event many economists believed would depress business activity and hiring.
But the news just isn’t good enough and hasn’t been for years now. So will 2013 be another year of painfully slow and steady improvement in the employment situation, or will we finally start seeing life in the labor market that will put a serious dent in our unemployment crisis? Higher taxes and (most likely) less government spending will surely take a bite out the economy and hiring this year, but there are still a few reasons to be optimistic that the economy and job growth will be more robust in 2013 than 2012:
A Healing Europe: The European debt crisis isn’t nearly as volatile now as it was in 2012. After European leaders watched yields on Spanish sovereign debt reach nearly unsustainable levels in June last year, the E.U. finally agreed in principle to creating a much stronger fiscal and monetary union that may allow it to stave off future banking crises. In addition, this fall the E.U. reached an agreement that actually has a realistic shot of lessening Greece’s debt load and putting that country on a path toward recovery by forcing losses on official-sector creditors. In the meantime, American banks have had more time to immunize themselves from potential European defaults, further reducing the risks that a blowup in Europe could cause financial panic in the U.S.
A Frisky Fed: Ben Bernanke has never shied away from aggressive action during his time as chairman of the Federal Reserve. But 2012 was the year he got serious about using the powers of the American central bank to engineer a robust recovery, rather than just stave off an economic collapse. In 2012, Bernanke pulled out all the stops in an attempt to stimulate the economy, announcing a new program of mortgage-backed-security buying and promising to keep interest rates low until the unemployment rate reached 6.5%, or inflation rose above 2.5%. These actions have kept the stock market buoyant and mortgage rates at historic lows, helping goose the housing market into a recovery after five years of falling residential real estate prices.
The Housing Market: A real estate recovery, after all, is nothing to sneeze at. Rising home prices can help bolster consumer demand, as the home is by far the most valuable property most Americans own. The real estate and construction industries also make up a significant part of America’s yearly output — averaging 5% of GDP historically. That number, however, has fallen closer to 2% in recent years. If real estate investment can once again regain its historical role in the U.S. economy, that will put us well on our way to a healthier economy. The housing-market recovery is tenuous and probably far too reliant on central-bank stimulus, but we’ll take rising home prices over falling home prices any day of the week.
So while the December jobs report wasn’t anything to get too excited about, it’s also not cause for depression. There are still plenty of reasons to believe things will be a bit better in the new year.