More Slow Job Growth -- Averaging the December and January Jobs Figures 
Jeff Lemieux
revised February 8, 2004 (editorial changes)

The number of jobs jumped up by 112,000 last month, after rising by only 16,000 in December 2003.  For analytic purposes, it is probably best to just average the December and January jobs figures -- December growth may have been understated (and January growth overstated) by outdated seasonal factors for holiday retail hiring.  That would imply an underlying job growth of about 64,000 a month.  That level of job growth is too low to spark a robust economic recovery, or to significantly reduce the unemployment rate (now 5.6 percent).

The January jump in jobs was less than most economists expected.  It was a disappointment mostly because we expected an even larger increase after the dismal December figure.  And it was disappointing because job growth remains too slow to dramatically reduce unemployment or boost wages and salaries, which will be necessary to ensure the recovery stays on track. 

Overall, job growth has averaged just under 75,000 a month over the last five months.  (Economists generally like to see sustained job growth of at least 200,000 a month before declaring that the economy is expanding robustly.)

In spite of recent strong GDP growth (4 percent in the fourth quarter, 3 percent for the full year in 2003), the U.S. job market has expanded much more slowly than in recoveries from previous recessions.

There is a silver lining.  Self-employment and jobs at very small or start-up firms (which the payroll jobs survey doesn't pick up) may have been a strong source of new employment over the last two years.  However, larger, more established firms continue to hold their payrolls down.

The following charts provide a quick summary of the employment situation.

Figure 1.  Payroll Employment (the commonly cited jobs counts)
Figure 2.  Payroll Jobs vs. Household Survey Employment
Figure 3.  Payroll Job Growth in the Last 3 Recessions
Figure 4.  Unemployment Rate


Figure 1.


Figure 2.


Figure 3.


Figure 4.


Links:
Centrists.Org A Closer Look at the Latest Jobs Figures -- Plenty of Stimulus, a Scarcity of Confidence (January 11, 2004)
Centrists.Org Interpreting the Diverging Employment Statistics (September 9, 2003)