Job Recovery Continues To Hit Bumps

The November job report was disappointing as job growth rose slower than expected and the unemployment rate increased by two-tenths of percentage point, as reported by the December 3rd, 2010 CNNMoney article written by Annalyn Censky.  While 39,000 jobs were created, it was much lower than last October's of 172,000.  Also, it should be noted that this is the 19th straight month of the unemployment rate being above 9%. which will break the Post-World War II record previously set in the 1980s.  Uncertainty in the business climate and deteriorating state and local fiscal conditions are all contributing to the sluggish job report.

A closer review of the press release from the Bureau of Labor Statistics shows declines in retail and manufacturing, while health care and temporary jobs were on the rise.  Even though most analysts projected that holiday sales would be better than last year, Black Friday sales show only a modest increase of 0.3%.  That might explain the loss of 38,000 in retail trade.  As for manufacturing, we did see an increase in activity for the 16th straight month, but it should be noted that the increase was less than October.  The Institute for Supply Management (ISM) showed that its activity index was at 56.6, which is slighly lower than October's 56.9.  In addition, firms have been able to boost productivity without increasing labor as described in this November 24th, 2010 Bloomberg Businessweek article written by Craig Torres and Anthony Feld.  Both of these factors can explain manufacturing jobs declining by 13,000.

When looking at overall jobs, one can surmise that businesses are awaiting a change in Congress next year.  One question is whether the Bush tax cuts will be extended to all Americans and not just the middle class.  In addition, they will be lobbying for changes in the tax code that will encourage more saving and investment.  When dealing with health care and other regulatory activity, they might also try to influence legislation to minimize their costs there.

As we look to the future, it will be important to anticipate trends that influence economic activity.  While Black Friday sales were somewhat disappointing, it will be interesting to see if sales activity will increase in December.  If sales are better than expected, then that can lead to more business optimism and more job creation.  In this globalized economy, we also need to monitor events abroad.  There is the European crisis where efforts are underway to minimize its contagion and there's North Korea's nuclear ambitions that threaten to disrupt economic activity in China and South Korea.  Even though the job market remains muddled and unclear, a turnaround in 2011 can occur, but the above trends will need to be more favorable.