The December jobs report provides more evidence of a sluggish economy. Employers have not resorted to large-scale layoffs, but they seem to be quite unwilling to hire.
During the year, the household survey found a net addition of 262,000 people with jobs. That is the lowest since the recession year of 2001, when there was a net job loss.
The establishment survey numbers appear to report that 1,328,000 jobs were created, with 1,054,000 of them in the private sector. I think those numbers will end up being revised to substantially smaller numbers before it is all over.
One reason is the Bureau of Labor Statistic’s birth-death model, about which I have written before. That model can overstate new jobs when the economy turns down (and understate them when it turns up), and I think that is what happened this year.
The model added 1,130,000 privtate-sector jobs to the survey in 2007. In other words, the raw surveys found fewer people working in the private sector in December than in December 2006, but the statisticians added more than a million jobs to account for jobs started in new companies that were not surveyed. Some of those jobs are probably real, but not all of them.
What this means is that the economy is limping into 2008. Employers are not ready to lay off people, and consumers are still spending at reasonable rates despite worries about home values. If either group decides to retreat, a recession is virtually certain. If not, perhaps the economy will keep growing slowly.
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