Clear64° FULL FORECASTClear64° FULL FORECAST
Make us your home page
Instagram

Economic gains dragged down by weak jobs growth

Federal Reserve Chairman Ben Bernanke, getting ready for a Senate Budget Committee conference Friday, said it could take five more years for unemployment to fall from the present 9 percent range to a more normal level of 6 percent.

Getty Images

Federal Reserve Chairman Ben Bernanke, getting ready for a Senate Budget Committee conference Friday, said it could take five more years for unemployment to fall from the present 9 percent range to a more normal level of 6 percent.

WASHINGTON — The U.S. economy is steadily adding jobs, but still just barely enough to keep up with the growth of the work force. The weakness underscores the nation's struggle to get back to something resembling normal employment.

The economy added 103,000 jobs in December, a figure that fell short of what most economists were hoping for. The unemployment rate did come down, to 9.4 percent from 9.8, but that was partly because people gave up looking for work.

"The labor market ended last year with a bit of a thud," Ryan Sweet, an economist at Moody's Analytics, said after the Labor Department released its monthly jobs report Friday. He said the drop in unemployment wasn't likely to be sustained.

Over the past three months, the economy has added an average of 128,000 jobs a month. That's just enough to keep up with population growth. Nearly twice as many are generally needed to significantly reduce the unemployment rate.

All told, employers added 1.1 million jobs in 2010, or about 94,000 a month. The nation still has 7.2 million fewer jobs today than it did in December 2007, when the recession began.

Some economists predict that the nation will create twice as many jobs this year as it did last year.

"The conditions are in place to get pretty good job growth this year," said John Canally, an economist at LPL Financial. "The payroll tax cut is in place, exports are booming, and banks are lending again."

But even if hiring picks up, the damage from the recession, which has been over for a year and a half, will take years to undo.

Federal Reserve Chairman Ben Bernanke told the Senate Budget Committee on Friday it could take five more years for the unemployment rate to return to a more normal level of 6 percent. Bernanke said the Fed's $600 billion bond-buying program is needed because unemployment will likely stay elevated for up to five more years. He said unemployment is likely to be around 8 percent two years from now.

Bernanke said there's rising evidence that a "self-sustaining" recovery is taking hold. He said he expects stronger growth because consumers and businesses will boost spending this year.

Factories are cranking up production. The service sector is growing at its fastest pace in more than four years. Consumers are spending more freely, and a payroll tax cut is likely to boost their activity further. Tax cuts are also likely to lead businesses to expand and hire more.

But weakness in job growth could slow this momentum, Bernanke cautioned, especially if consumers spend less.

Job growth would be stronger if not for the depressed housing industry and financially ailing state and local governments.

Construction firms and local governments shed 36,000 jobs in December.

Those two segments of the economy are "going through a long-term restructuring," said John Silvia, chief economist at Wells Fargo Securities. "That's limiting the overall job gains that you're seeing."

Consumers borrowing more, but selectively

U.S. consumers increased the amount of money they borrowed in November to buy cars and attend college, marking the first back-to-back consumer credit gains in more than two years. The Federal Reserve says consumer debt rose $1.3 billion in November after a $7 billion increase in October. The strength came in the category that includes auto loans and student loans. The category that includes credit card debt fell for a record 27th month, but the November drop was smaller than the previous four months.

Economic gains dragged down by weak jobs growth 01/07/11 [Last modified: Monday, November 7, 2011 1:53pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Associated Press.
    

Join the discussion: Click to view comments, add yours

Loading...