Layoffs Ease, But Hiring Is Still Sluggish

Friday’s jobs data helped confirm that the worst of the recession-related layoffs have eased. Until employers begin shifting back to a solid pace of new hiring, though, most Americans will still have a hard time finding a new job.

The Labor Department said Friday that U.S. employers added 227,000 jobs to their payrolls last month, while the unemployment rate held steady at a three-year low of 8.3 percent as more people, hopeful they would find work, returned to the labor force.

The report marks the first time since early 2011 that payrolls have grown by more than 200,000 for three months in a row. And those months were even better than previously reported, after the government revised the December and January numbers to show an additional 61,000 jobs were created.

Much of the improvement is coming as an historic wave of layoffs - one that lingered well after the recession ended in 2009 - appears to have finally abated.

"All the good numbers that we're getting are largely because of a reduction in the number of layoffs," said Mark Zandi, chief economist at Moody's Analytics. "We really have not yet seen a significant pick-up in hiring; the level of hiring is still very, very low. As soon as businesses starts to engage in hiring in a more normal way, I really think we can start getting monthly job numbers of 300,000 or 350,000."

The pace of layoffs has eased from both public and private employers. From a peak of 326,000 in February 2009, so-called "mass layoffs" by private employers tracked by the Bureau of Labor Statistics fell to 129,000 in January, according to a separate report. That's a level not seen since shortly after the recession began at the end of 2007.

Layoffs of government workers - especially at the state and local level - have also slowed. But that may be only temporary, according to Diane Swonk, chief economist at Mesirow Financial.

"We're not done," she said. "It's shifting from the state and local sector, which aside from a few states, have already put their fiscal houses in order and made a lot of the cuts already. That's going to be abating. On the other side of it, though, we've got federal cuts coming. So we're in a bit of a sweet spot here with government (employment)."

Private employers, meanwhile are adding jobs only where they have to. Much of that is in the form of converting temporary workers to full-time hires. Even those hires are very selective, according to Jeff Joerres, CEO of Manpower, a national employment placement firm.

"Companies are saying 'I'm going to hire but I'm going get this person as productive as possible,'" he said. "There's much more precision in hiring. We're not sure that's going to go away until we get really robust demand. And we don't see that any time soon."

Most economists see overall growth in the economy slowing during the first half of this year. A recent survey by the National Association for Business Economics, a group of private economists, predicted gross domestic product would drop from its 3.0 percent pace in the fourth quarter of last year to 2.0 percent in the first quarter of 2012, gradually picking up to 2.4 percent in the second quarter.

That slowdown could bring another soft patch to the job market.

"Maybe we're starting a new trend, but I've seen this movie before," said Alan Levenson, chief economist at T. Rowe Price. "Just a year ago we had some strong employment gains at the turn of the year, then a pullback in the spring. It's tempting to lean toward the notion we're ramping up to faster job growth and staying there. But again, just look at a chart of job growth in the second half of 2010 and into the early months of last year, and then see how we dropped off very sharply in the spring."

Recession hangover
Until the pace of hiring sees a sustained pickup, the labor market will continue to suffer from one of the worse recession hangovers in decades. Few economists expect the unemployment rate to fall below 8 percent this year. A broader measure of overall health in the job market - the percentage of the total population with a job - is stuck at lowest level in nearly 30 years. Just 58.5 percent of Americans over the age of 16 were employed in February, in part because so many discouraged workers, adult students and early retirees have left the pool of people counted in the official workforce.

Many of those without a job have been out of work far longer than in past recessions. The average length of unemployment remained stuck at 40 weeks February, by far the highest level since the government began tracking the duration of unemployment in 1948. That's nearly twice as long as peak levels seen after the last three recessions.

The health of the job market is also very uneven. In 65 of the 373 metropolitan labor markets tracked by the government, the jobless rate is 20 percent or higher. Widespread job losses in the construction and real estate industries will take years to make up.

"In a normal recovery, about a quarter or a third of it is coming from construction and housing," said University of Chicago economist Austan Goolsbee. "We've still got five million vacant homes, so that's probably still going to remain relatively weak."

The U.S. economy also remains vulnerable to outside shocks - from a further surges in oil prices to a deeper recession in Europe or a slowdown in China. If those disruptions are relatively minor, most economists expect the pace of job growth to continue a slow, steady course.

"If there's a bigger disruption, companies are always ready to be agile," said Manpower's Joerres. "It's very different than previous times. They can hit that index finger and turn hiring off in 36 hours. We wouldn't have seen that in 2008 and wouldn't have seen that prior to that as well."

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