Economy likely ended 2011 with solid job growth

Published 7:31 am Friday, January 6, 2012

WASHINGTON — The U.S. job market strengthened in the second half of 2011, and December is expected to cap a solid finish.

Economists forecast that employers added a net 150,000 jobs last month, according to a survey by Factset. They also predict that the unemployment rate ticked up to 8.7 percent from 8.6 percent, which was the lowest rate since March 2009.

The Labor Department will issue the December jobs report at 8:30 a.m. Eastern time Friday.

The projected hiring gains would mark a six-month stretch in which the economy generated 100,000 jobs or more in each month. The last time that happened was in April 2006 — more than a year and a half before the country plunged into the Great Recession.

A more robust hiring market would coincide with other positive data that show the economy ended the year with some momentum.

Weekly applications for unemployment benefits have fallen to levels last seen more than three years ago. Holiday sales were solid. And November and December were the strongest months of 2011 for U.S. auto sales.

Many businesses say they are ready to step up hiring in early 2012 after seeing stronger consumer confidence and greater demand for their products.

Even the projected increase in the unemployment rate could be a positive sign. The rate is expected to rise as more people feel better about their chances to find employment and resume job searches. The government counts out-of-work people as unemployed only if they are looking for work.

The rate fell from 9 percent in October to 8.6 percent in November, partly because about 300,000 people gave up looking for work. People routinely enter and leave the work force, though 300,000 is more than usual.

Still, it also dropped because small business hired more workers.

The government uses a survey of mostly large companies and government agencies to determine how many jobs were added or lost each month. It uses a separate survey of households to determine the unemployment rate.

The household survey picks up hiring by companies of all sizes, including small businesses and companies just getting off the ground. It also includes farm workers and the self-employed, who aren’t included in the survey of companies.

The household survey has shown an average of 321,000 jobs created per month since July, compared with an average of 13,000 the first seven months of the year.

When the economy is either improving or slipping into recession, many economists say, the household survey does the better job of picking up the shift because it detects small business hiring.

Economists surveyed by the Associated Press project that the economy will generate an average of 175,000 jobs per month this year. That would be a step up from average monthly gains of 130,000 last year and 78,000 in 2010.

The pickup in hiring reflects some modest improvement in the economy. Growth will likely top 3 percent at an annual rate in the final three months of this year, economists expect. That would be a sharp improvement over the 1.8 percent growth in the July-September quarter.

Even so, many economists forecast that growth could slow to roughly 2 percent this year. Europe is almost certain to fall into recession because of its financial troubles. And without more jobs and higher incomes, consumers may have to cut back on spending. That could drag on growth in 2012.

President Barack Obama could face voters in November with the highest unemployment rate of a sitting president seeking election since World War II. Unemployment was 7.8 percent when Obama took office in January 2009.

But Obama could benefit if the unemployment rate continues to dip. History suggests that presidents’ re-election prospects hinge less on the unemployment rate itself than on the rate’s direction during the year or two before Election Day.