The Great American Job Destruction isn’t over quite yet

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The long-awaited end of the Great American Job Destruction of 2008 and 2009 did not arrive in December, as some forecasters hoped it might, as the Bureau of Labor Statistics reported another 85,000-job decline in nonfarm payroll employment this morning. The BLS did revise November’s payroll number, initially estimated at -11,000, up to +4,000—marking the first month of job gains since December 2007. But (a) +4,000 is statistically equivalent to no change at all and (b) they can always revise it back down again. In fact, there’s going to be a big “benchmark revision” of the payroll data next month that will change all the numbers going back to April 2008.

Beyond that, the general picture—of a job market that’s not exactly getting better, but has emerged from its free-fall and may start getting modestly better soon—isn’t changed much by this report. The unemployment rate, which is the product of a different survey than the payroll number, stayed steady at 10.0%. But the rest of the survey of 60,000 households that produced that steady unemployment rate was far less encouraging. It showed a 589,000-job drop in employment—adjusted for a seasonal factors, as are all the numbers cited in this post—in December; it was only because the number of people reported as “not in labor force” grew by 843,000 that the rate held steady. The broadest unemployment measure, U-6, which tries to account for those who want jobs but have been too discouraged to look lately, came in at 17.3% in December, up from 17.2% the month before. (The household survey results tend to be pretty volatile, which is why markets usually focus more on the payroll numbers.)

Construction and manufacturing led the way downward for the month, as they have for much of the past two years. Health care employment was up, as it has been for much of the past two years. Temporary employment was up by 47,000 jobs, which if you believe Dan Gross is a sign of good things to come, but if you believe this week’s BusinessWeek (sorry, Bloomberg BusinessWeek) cover story is just a sign of how good jobs with benefits are being replaced by crappy ones. Finally, government employment was down for the month, but that’s going to change big-time in the next few months as the feds gears up for the 2010 Census. So we can probably look forward to a run of positive job reports. But the big question is whether the gains will continue after the Census hiring is done.

Finally, since Ian Shepherdson at High Frequency Economics totally predicted this (he called for a 75,000-job drop in payroll employment, while the consensus among forecasters was for no change at all), I’ll give him the last word:

the underlying trend undoubtedly continues to improve and payrolls will be positive by Feb, not least because Census hiring will start to rise. But the core is improving too; manuf just -27K in Dec and trending towards stability; services down just 4K after a 62K gain in Nov; temp hiring soaring, up by 47K in Dec. Unemployment will be slow to fall though because people will come back into the labor force, and wages will keep slowing.