Washington The economy added 151,000 jobs last month — the best showing since April, but only about half what it would take to put a noticeable dent in unemployment.
Two big questions: What will it take for businesses to hire that vigorously again? And when will that be?
With Congress facing gridlock, some economists say it will be at least a year before companies gain enough confidence to hit the sweet spot of 300,000 new jobs a month. That’s what it would take to reduce the unemployment rate by a full percentage point over a year.
“It could be another year or two,” says Paul Ashworth, senior U.S. economist at Capital Economics. “Hopefully, I’m wrong and the economy catches fire, but you’d have to be a pretty brave man to predict that’s going to happen.
The unemployment rate held steady for the third straight month at 9.6 percent in October, the government said Friday. The private sector added 159,000 jobs, also its best performance since April. Retailers added 28,000 and health care firms 24,000. Financially ailing local governments shed 15,000 jobs.
Mark Zandi, chief economist at Moody’s Analytics, holds out hope that “the preconditions are coming into place for much better job growth. Big companies, midsize companies are very profitable.”
Zandi says those companies need to get over the shock of the recession and regain the confidence to start hiring again. That will probably take another year or so, he says. He thinks net job creation won’t consistently hit the magic 300,000-a-month mark until 2012.
Job creation used to bounce back faster after recessions. When manufacturing occupied a bigger part of the economy, factories would quickly revive the labor market by recalling laid-off workers once conditions improved. After the severe 1981-82 recession, for instance, the economy generated 287,000 jobs a month in 1983 and 323,000 in 1984. Monthly growth exceeded 300,000 jobs 24 times in the 1980s.
Some months were especially explosive: In September 1983, the economy created 1.1 million jobs. In February 1984, it was 479,000.
But advances in automation and the development of a mainly service economy mean employers are slower to recall laid-off workers or hire new ones. Since 1983, the economy has tended to need a lot of time after a recession to create many new jobs. Not until 22 months after the 1990-1991 recession officially ended, for example, did job growth hit the 300,000-a-month mark. It took 28 months after the 2001 recession.
This year, with the Great Recession officially over since June 2009, the average gain is 87,400 jobs a month. At that pace, it would take until the end of 2017 to replace the 7.5 million jobs wiped out by the downturn that began in December 2007.
The economy seems unlikely to get much help from the next Congress. Republicans, who seized the House and gained seats in the Senate in Tuesday’s midterm elections, have vowed to resist any further stimulus spending. They say the Obama administration’s $814 billion stimulus program failed, though most economists say it kept the recession from worsening.