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Slow Job Growth Worries White House, Economists

Construction workers lug building materials at a job site in New York's midtown Manhattan. While a number of industries added jobs in December, the construction sector lost 16,000.
Swoan Parker
Construction workers lug building materials at a job site in New York's midtown Manhattan. While a number of industries added jobs in December, the construction sector lost 16,000.

President Obama said he was cheered Friday by improvements in the nation's jobless rate, but administration officials and private economists are portraying the report in more mixed terms.

The unemployment rate dropped sharply to 9.4 percent last month — its lowest level in more than a year and a half — as tens of thousands of people found new jobs but many others quit looking for work, the government said Friday.

The Labor Department reported that employers added 103,000 jobs in December, with an influx of 113,000 jobs from private employers but a drop of 10,000 government positions. But that is far fewer than the 150,000 new jobs that many economists expected and the roughly 125,000 needed to account for people entering the labor pool. It also fell significantly short of a report from private payroll processing company ADP predicting nearly three times as many new jobs.


Speaking at a factory in Landover, Md., the president said the latest job report shows the economy is improving and growth is picking up.

"We know these numbers can bounce around from month to month," he acknowledged. "But the trend is clear.

"Even though our economy is recovering, we have a lot to do," Obama said.

Economists agreed. "Obviously, 100,000 new jobs is decent, but we're going to have to do a lot better than that if we want to really bring the unemployment rate down," said Gus Faucher, director of Moody’s Analytics in West Chester, Pa.

"I wouldn't be surprised to see the unemployment rate actually move higher in the first half of 2011, because you'll have people who have been discouraged from looking for work start to job hunt again," he said.


Stephen Bronars, senior economist with Welch Consulting, said he was somewhat encouraged by Friday's Labor report but that December's jobs numbers were "a bit of a wash" overall.

"There are a lot of seasonal adjustments that go into that number. ... We've got a lot of people moving in and out of the unemployed category," he said. "We're pretty much just treading water over the last few months."

The government also said more people were hired in October and November than first estimated: 210,000 jobs in October, up from 172,000, and 71,000 in November, up from 39,000.

Overall, the number of out-of-work Americans fell by more 500,000 last month to just under 14.5 million. But that number includes some 260,000 people who have given up their job searches — a key reason for the drop in the unemployment rate because the government no longer counts people as unemployed when they stop looking for work.

Including those who are working part time but would prefer full-time work, and those who have given up looking for work, the so-called underemployment rate was 16.7 percent last month. That's down from 17 percent in November.

Joanely Carrero restocks shelves at a Target store in Miami. Retailers added 12,000 jobs last month.
Joe Raedle
Getty Images
Joanely Carrero restocks shelves at a Target store in Miami. Retailers added 12,000 jobs last month.

The unemployment rate has topped 9 percent for 20 months, the longest such stretch on record. Last year, the nation added 1.1 million jobs, or an average of 4,000 jobs a month.

Two sectors — health care and leisure and hospitality — posted the strongest job gains in December, adding 36,000 and 29,000 jobs, respectively. Retailers also added 12,000 new jobs and manufacturers 10,000. But the bleeding continued in construction, which cut 16,000 jobs.

Leisure and hospitality services "tends to be a cyclical industry that follows consumer spending, so the fact that we're seeing job gains there is a positive," Faucher said.

The U.S. jobs report follows generally brighter economic data in recent weeks as the economy emerges in fits and starts from the longest and sharpest recession in living memory.

Factories have ramped up production, and the service sector is growing at its fastest pace in more than four years. Fewer people applied for unemployment benefits over the past month than in any other four-week period in more than two years. Consumers are also spending more freely, and a payroll tax cut is likely to boost their activity further.

Many economists expect hiring to increase this year, with some predicting double last year's total of jobs. A tax cut package enacted last month also should boost consumer and business spending.

The employment report came as Obama appointed Gene Sperling as director of the National Economic Council, a position with oversight of White House policy. He replaces outgoing Director Lawrence Summers.

Sperling, a counselor to Treasury Secretary Timothy Geithner, also served as the NEC chief under President Clinton, playing a key role in the 1993 deficit reduction bill.

"He's a public servant who has devoted his life to making this economy work -- and making it work, specifically, for middle-class families," Obama said.

Sperling's appointment is part of a broader shakeup in White House senior staff in which William Daley was named as chief of staff and press secretary Robert Gibbs announced Wednesday that he would step down in the coming months.

Meanwhile, Federal Reserve Chairman Ben Bernanke addressed members of the Senate Budget Committee on Friday morning — his first such appearance since November, when he announced a controversial plan to buy $600 billion in Treasury bonds.

Republicans and some Fed officials have opposed the plan, saying it could spur inflation. On Friday, Bernanke was expected to defend and deliver a rosier outlook for the economy in 2011.

Bernanke cited improvements in consumer spending and a drop in jobless claims as hopeful signs.

"We have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold," he told lawmakers. Without a bond-buying plan, Bernanke said, there was a risk of very low rates of inflation that, along with high unemployment and other factors, "could threaten the strength and sustainability of the recovery."

Material from The Associated Press was used in this report

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