Major Job Growth at Last?

There's one big thing the recovery has been missing, and that's jobs. Reports vary on how quickly that missing piece may be coming around.

By Dees Stribling, Contributing Editor

The missing piece of the recovery puzzle, at least since one could argue that a recovery was under way, has been jobs. Increasing corporate profits, higher stock prices, expanding manufacturing and exports–all these things are well and good, but as long as there’s a glacial pace in hiring by U.S. businesses, the recovery is a hollow thing indeed.

On Wednesday, ADP reported that the private sector added 297,000 jobs in December. Is that a harbinger of a strong official jobs report for the month, which will be released by the U.S. Department of Labor on Friday? Maybe.

In November, ADP, which tracks payroll growth, significantly overstated job growth, and the subsequent Labor Department numbers were a letdown. On the other hand, ADP has a track record of overestimating for November, but underestimating for most of the rest of the months. If that’s the case this time around, Friday might turn out to be a very good day indeed for the recovery.

Or not. Complicating the picture is the ISM Non-Manufacturing index, also published on Wednesday. The index was up to 57.1 in December from 55 in November, which certainly means that economic activity is increasing. Among the component indexes, New Orders jumped 5.3 points to 63 and Prices were up, too, from 63.2 to 70. Curiously, however, the Employment component of the index dropped from 52.7 to 50.5, pointing in a different direction than the ADP report.

One more employment data point for December came from Chicago-based Challenger Grey & Christmas, which said that nationally, planned layoffs totaled about 32,000 in December, the lowest planned number of mass layoffs since mid-2000. That’s 29 percent lower than the planned layoffs in December 2009.

Hoenig optimistic about U.S. growth

For his part, Fed dissident Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, was upbeat about the economy on Wednesday, speaking in Kansas City. “I am increasingly confident that the recovery is both sustainable and likely to gain strength over the next several quarters,” Hoenig said, adding that the growth will be in the range of 3.5 percent to 4 percent for a few years.

Hoenig, who has consistently voted against Fed policy–and was often the only one among his colleagues on the FOMC in 2010 to do so–also spent a fair amount of the speech defending his role as the nay vote on such matters as QE2, which he characterized as an exercise in excess that might return to haunt the economy later. “The idea that a dissenting vote is confusing, counterproductive and generally undesirable is unhealthy,” he said.

Because of the way FOMC membership rotates, Hoenig will not be voting on Fed policy in 2011. But he’s likely to keep using the central bank as a bully pulpit.

Anticipated good jobs numbers, Wall Street had a positive sort of day on Wednesday, with the Dow Jones Industrial Average up 31.71 points, or 0.27 percent. The S&P 500 gained 0.5 percent and the Nasdaq advanced 0.78 percent.