February 3, 2012

Economic Sunshine Follows Groundhog Day

Bruce Yandle

Distinguished Adjunct Fellow
Summary

The Bureau of Labor Statistics (BLS) January Employment Report brought rays of sunshine that promise better days ahead for the economy.

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On February 2, the groundhog saw his shadow and promised six more weeks of bad weather. In sharp contradiction, on February 3, the Bureau of Labor Statistics (BLS) January Employment Report brought rays of sunshine that promise better days ahead for the economy. In January, some 243,000 workers joined the nation’s payrolls. With that, I say, “Bring on the snow!”

Of course, one good data point does not define a trend, but the BLS report suggests the economy may be making its way around an important corner. First off, in January, the labor force grew—which means more people counted themselves as seeking employment. The unemployment rate fell from 8.5 percent to 8.3 percent, which means more of those looking found work. Added good news came with the fact that the gains were far more widespread across industries than in the recent past.

Professional and Business Services led the growth categories with an additional 70,000 workers hired. Some 33,000 of this count were in employment services. Call this temporary help. We can take that to mean that more firms are putting an employment toe in the water, just checking to see if they should make permanent hires. Manufacturing came in with an additional 50,000 hires, and Leisure and Hospitality Services added 44,000 workers. Added to the joy were 21,000 additional workers added in the almost dormant construction sector. This follows an addition of 33,000 in December. Now, that is beginning to look like a trend!

Government employment is still losing ground, with most of the loss coming from the federal and local government ranks. Interestingly, state governments nationwide added 3,000 workers, with all of the growth coming from the state education sector. More than offsetting was the 11,000 workers lost from local government payrolls, with 9,600 of that coming from education.

Is the economy on the mend? There are lots of compelling data that say the Great American Bread Machine is getting in gear. Will we see more acceleration? That is the larger question. And here, the data say be cautious. The road ahead is still filled with potholes of uncertain European struggles and unknown action on the Washington fiscal policy front, just to mention two.