Jobs — and Other Economic News
12:00 AM, Jan 7, 2012 • By IRWIN M. STELZER
“We believe that the U.S. is best positioned for both a cyclical recovery and dealing with … its growing debt burden,” advised Goldman Sachs’s chief investment officer for private wealth management, Sharmin Mossavar-Rahmani, to the firm’s clients in her investment management division’s “outlook.” There are the usual caveats, but all in all this report trumpets “the economy’s continued upward trajectory in face of a variety of destabilizing shocks…”
Friday’s jobs report supports this guarded optimism. The private sector added 212,000 jobs in December, more than offsetting the 12,000 reduction in public sector employment. Almost every sector of the economy recorded gains. The unemployment rate dropped to 8.5 percent, the lowest since February 2009, from a revised November figure of 8.7 percent.
Not all of the news was good: The number of long-term unemployed is stuck at 5.6 million, 42.5 percent of the total unemployed. And most experts agree that it will take 250,000 new jobs per month to get the unemployment rate down closer to the 8 percent level that President Obama would like to take into the year-end elections. Still, few doubt the labor market is improving, although some challenge the conclusion of Alan Krueger, chairman of the president’s council of economic advisers, that this makes it “critical that we continue the economic policies that are helping us to dig our way out of the deep hole that was caused by the recession of 2007” which, of course, was not caused or deepened by the current resident of the White House, but by his predecessor.
There is little that is not at least mildly cheering in the other news since the last bottle of champagne was drained on New Year’s Eve. The Lindsey Group reckons that the jobs report is consistent with an economy growing at an annual rate of 3.5 percent. Spending on construction projects, although still only half of what is considered a healthy rate, increased in three of the last four months for which data is available. The manufacturing sector has grown for 28 consecutive months, with the December growth rate the fastest in six months. The better news is that the sector seems set to grow even faster to replace depleted inventories: The Institute for Supply Management’s index of new orders is up, a sign that output will follow.
Autos are leading the parade. General Motors, Ford, and Chrysler reported year-over-year sales gains of 13 percent, 11 percent, and 26 percent, respectively, with demand for pickup trucks and Chelsea tractors leading the way, to the undoubted chagrin of the White House green brigade. The Detroit trio benefited from the appeal of their new models, the fact that Toyota and Honda have been hit by supply disruptions from the March earthquake in Japan and flooding of their plants in Thailand, and the lingering hit to Toyota’s reputation by its multiple quality problems and subsequent recalls in 2010. The Japanese companies both recorded sales drops of 7 percent.
Autos are not the only manufacturing sector that is growing. Makers of paper products, textiles, machinery, and other sectors also recorded gains. As did retailers at the high and low ends of the price spectrum. Saks Fifth Avenue and Nordstrom’s rang up December sales increases of almost 6 percent and 9 percent, respectively, while lower-end J.C. Penny, Sears, and Kmart fared poorly, the latter two in part because of a failure to invest in store upgrades in recent years.
The hospitality industry is mimicking the experience of retailers. Upscale hotels have been able to raise room rates 13 percent, and luxury hotels have done even better, increasing rates by 21 percent according to Smith Travel Research. Four Seasons Hotels and Resorts reports that room rates are up 9 percent this year, good news for Saudi prince Alwaleed bin Tal and Bill Gates, whose investment arms bought the hotelier for $3.4 billion in 2007.
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