Improved Job Figures Surprise Economists
Originally published on Fri February 3, 2012 6:54 pm
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January's weather looked like spring in much of the country, and today's monthly employment report suggests it's spring in the job market, too. As NPR's John Ydstie reports, the economy added 243,000 jobs in January, and the unemployment rate dropped for the fifth straight month.
JOHN YDSTIE, BYLINE: Nobody expected that job creation in January would be this strong, or that the unemployment rate would fall again to 8.3 percent – nobody including John Silvia, chief economist at Wells Fargo.
JOHN SILVIA: It's far better than anyone would have expected, I think six months ago, so it looks good.
YDSTIE: What's behind the big jump in jobs? Well, good weather was part of it. That allowed construction projects to move ahead, and storms didn't stop a lot of people from making it to work. But Silvia says, most importantly, employers also saw less of a slowdown in Asian export markets than they expected, and they gained some confidence that Europe might be able to avoid an all-out financial meltdown.
SILVIA: And I think that a lot of firms looked at their sales and output goals and said, hey, you know, it looks like we can get there from here. We just need to hire some more workers, and that is exactly what's happening, I think.
YDSTIE: That's what Rich Gimmel did. He owns and runs Atlas Machine Tools and Supply in Louisville, Kentucky.
RICH GIMMEL: In January, we hired four experienced people, but we added about four more in trainee positions.
YDSTIE: And how many jobs do you still have open?
GIMMEL: We have about eight jobs open now, all of them in skilled trades.
YDSTIE: Atlas's 200 workers produce machines and components used by other manufacturers. That sector added 50,000 jobs in January. Growth in manufacturing has helped sustain the U.S. recovery and has included a lot of exports. But economist Paul Kasriel, from Northern Trust in Chicago, says a long but mild recession in Europe means U.S. exports will face some headwinds.
PAUL KASRIEL: But not a hurricane. And I think that what's going on domestically is going to more than compensate for the weakness that we're going to see in our exports in 2012.
YDSTIE: Kasriel says improvements within the U.S. economy are key, and he traces them to a turnaround in bank lending. It grew at a 5 percent annual rate in the last half of 2011 after contracting in the first half of the year. He says the scenario is a lot like the recovery of the early 1990s. It was initially hindered by troubles in the nation's banks and savings and loans.
KASRIEL: That was the first jobless recovery, the recovery that started in the spring of 1991, and then in 1993, banks started to lend again because the banking system was able to lend again, and the economy took off. And I see something like that happening now.
YDSTIE: President Obama was cautiously optimistic in remarks made today in Arlington, Virginia. He said the jobs numbers would continue to go up and down in the coming months, and there are still far too many Americans who need a job.
PRESIDENT BARACK OBAMA: But the economy is growing stronger. The recovery is speeding up. And we've got to do everything in our power to keep it going.
YDSTIE: The president said that means the Congress must extend the payroll tax holiday and long-term unemployment benefits set to expire at the end of the month. Employer Rich Gimmel doesn't think the unemployment benefits should be extended, but he agrees with the president on the payroll tax cut.
GIMMEL: I can't think of too many moves the government could make that are smarter economically than to put the money back in the pockets of consumers and let them drive the economy from the ground up.
YDSTIE: Economist Paul Kasriel doubts that extending the payroll tax holiday will make much of a difference. But he says it won't hurt. The financial markets responded favorably to the good jobs report. The Dow Industrials closed up more than 1 percent, near a four-year high. The NASDAQ closed at an 11-year high. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.