Labor market seen improving, but pace glacial PDF Print E-mail
Friday, 02 December 2011 09:28
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Employment growth likely picked up speed in November, but the pace is not expected to be quick enough to bring down the country's 9 percent jobless rate.

Nonfarm payrolls likely increased by 122,000 last month, according to a Reuters survey of economists, which would outpace October's 80,000.

The poll was conducted before a report on Wednesday that showed private companies hired the most workers in nearly a year in November. That report suggested Friday's broader gauge of nonfarm employment could rise by as much as 150,000, some analysts said.

"The labor market is gradually healing. It's a glacial pace, but we are taking small steps in the right direction," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.

The Labor Department will release its closely followed employment data at 8:30 a.m. EST (1330 GMT).

The report is unlikely to take much pressure off President Barack Obama, whose economic stewardship will face the judgment of voters next November. The outlook for the U.S. economy is also being threatened by Europe's ongoing financial crisis.

Unless the jobs report is far off consensus, it is not seen as proving decisive for the U.S. Federal Reserve, which is weighing whether the recovery needs further monetary policy support.

Many analysts think the relative strength of the report will in keeping with a recent trend, be bolstered by upward revisions to the employment counts for September and October.

"The (Bureau of Labor Statistics) has the tendency to delay the count of small business employment; that's the way their model and collection of data work," said Adolfo Laurenti, deputy chief economist at Mesirow Financial in Chicago.

Data ranging from manufacturing to retail sales suggest the pace of expansion could top 3 percent, in contrast to China, where growth is cooling and much of Europe, where growth has stalled.

While the economy's growth pace appears to have accelerated from the third quarter's 2 percent annual rate, it is still insufficient to cut into the high unemployment rate, and Europe's festering debt crisis poses a big threat.

FISCAL DRAG IN 2012

At the same time, U.S. fiscal policy is set to tighten in the new year, even if lawmakers extend a payroll tax cut.

Taken together, some analysts believe the headwind facing the U.S. economy will lead the Fed to ease monetary policy further by buying more bonds.

"We still have a very long way to go; the unemployment rate is barely budging. I would favor the Fed going for a third round of quantitative easing," Sweet said. "It's the only powerful tool left, even though it's losing some of its bang."

Though the economy emerged from recession two years ago, about 25 million Americans are either out of work or underemployed, a fact that is hurting Obama's chances of winning a second term.

Analysts say the economy needs to create at least 125,000 jobs every month just to keep the unemployment rate steady. So far this year, job growth has averaged 125,600 jobs a month. At that pace, it would take about 4-1/2 years for employment just to return to where it was when the recession started.

But there are reasons to be cautiously optimistic.

While the government's survey of employers has shown a still tepid pace of job growth, its separate poll of households that is used to calculate the unemployment rate has suggested more-robust jobs gains.

At the same time, a broad measure of unemployment that includes people who want to work but have given up looking for jobs and those working only part time for economic reasons dropped to 16.2 percent in October from September's nine-month high of 16.5 percent.

And the average duration of unemployment in October eased off the record high of 40.5 weeks hit in September.

PRIVATE SECTOR SHOULDERS BURDEN

All the expected increase in nonfarm payrolls in November will again come from the private sector, where employment is seen rising 140,000 after increasing 104,000 in October.

Government employment is expected to fall by 18,000. Public payrolls have dropped in nine of the past 10 months as state and local governments have tightened their belts.

Outside of government, job gains are likely to be almost across the board, although retail employment is bit of a wild card because of difficulties of anticipating seasonal swings as stores gear up for holiday sales.

Elsewhere, construction payrolls are expected to rebound after losing 20,000 jobs in October, and factors jobs are also seen increasing, with most of the boost from automakers.

Health care and social assistance hiring is expected to pick up after adding the smallest number of jobs in nearly two years in October. Temporary hiring - seen as a harbinger for future hiring - is also expected to show more gains.

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