By Jonnelle Marte
More people are collecting paychecks, according to encouraging data released Thursday. But economists say much more will have to change before there’s reason to believe the the job market is turning around.
The private sectored added 325,000 jobs in December in the largest gain since December 2010, according to a monthly report from payroll giant Automatic Data Processing. Figures from the Labor Department also show fewer people are collecting unemployment benefits—two signs that the job market is improving. But until there’s a sustained boost in spending, higher economic growth and more certainty form America’s business partners abroad, finding a job will remain a great challenge, experts say. “We’re taking steps in the right direction,” says Ryan Sweet, senior economist for Moody’s Analytics. “It’s just the job market is not off and running.”
Companies have more cash on hand than they did during the recession, but they won’t feel comfortable spending it on new workers until they see more consumers spending at their stores, says Sweet. Some businesses did get a boost in December from strong holiday spending but the increase would need to last for several quarters in a row before companies start adding jobs, says Sweet. Many firms are also getting more from the workers they do have as more employees put in longer hours and let vacation days go unused, says Jackie Greaner, head of talent management in North America for Towers Watson.
Another factor holding employers back: while the economy is expanding, it isn’t growing fast enough to encourage hiring, analysts say. GDP is expected to grow slightly less than 3% in 2012, says Sweet, in line with what businesses are currently equipped to produce and sell. But the economy would need to grow at a faster pace before businesses feel the need to expand and bring on more staff, he says. Until large sectors like housing pick up, demand for jobs in areas like construction are likely to remain subdued, adds Sweet.
And analysts say both spending and hiring are likely to remain sluggish until fears over Europe subside. Businesses with a large presence abroad are being hurt by decreased spending due to the recession worries on the continent, says Sweet. Business owners and consumers are also concerned the debt issues there could spiral over to the U.S. and lead to a greater economic slowdown at home, despite signs that the economy in the U.S. is stabilizing, says Greaner. “No matter what happens in the U.S., we’re part of a global economy and that has really affected executives and when they’re deciding to add staff.”
Some other caveats to Thursday’s bright numbers: while the ADP report is encouraging, analysts say those figures and the jobless data being released Friday from the Labor Department rarely match up. And even though analysts adjust monthly data to account for seasonal hiring done during the holidays, December figures are still typically higher than other months because of it, says Sweet: “it’s very difficult to adjust for all of it.”