US Outlook: Job Market Improves, But Will It Last?

Filed under: Hiring & Staffing,Labor,News,The Economy |

In the most recent sign the job market in the US is steadily improving, the number of people on unemployment benefits dropped to the lowest point in almost four years last week, according to a US Department of Labor report issued 16 February 2012.

job market

In the unemployment report, the Labor Department reports weekly applications for unemployment benefits declined 13,000 to a seasonally adjusted 348,000. It was the fourth drop in five weeks and the fewest claims since March 2008, just as financial crisis was underway and the economy was contracting.

The report continued positive momentum in the US labor market, which is likely take years to fully recover the disastrous economic policies of the Bush era.

Both Wall Street and Main Street think the overall economy is slowly but surely improving.

However, some economists doubt the current job market growth momentum will continue throughout 2012.

A Gallup poll released 14 Feb 2012, found Americans have grown steadily more positive about current economic conditions since August 2011. The sense of increasing economic confidence in 2012 so far seems largely driven by consumers’ sunnier feelings about the U.S. economy’s future, according to Gallup.

According to the poll, the percentage of Americans saying the economy is “getting better” increased to 42% last week, while the percentage saying it is “getting worse” fell to 54%. Both of these measures are at their best levels since the 43% “getting better” and 52% “getting worse” of the week ending 13 February 2011. In a separate question, Gallup found consumers’ “poor” ratings of the economy, now at 41%, are at their lowest level in a year.

U.S. economic confidence continues to improve, consistent with January’s modest improvement in unemployment and job creation.

Gallup’s finds dovetail with those of business research organization The Conference Board.

The Conference Board Employment Trends Index (ETI) increased 0.73% in January to 105.81, from the revised figure of 105.04 in December. The January figure is also up 5.9% from the same month a year ago.

“The Employment Trends Index has been improving rapidly for four straight months, suggesting somewhat more robust job growth is likely to continue in this quarter,” says Gad Levanon, director of macroeconomic research at The Conference Board. “Beyond that we still remain cautious. We expect sluggish growth in economic activity in the first half of 2012 and therefore we do not foresee the strengthening of the labor market to be sustained in the second quarter of 2012.”

Ben Bernanke job market
Fed Chairman Ben Bernanke

Gallup’s poll analysis points out that the U.S. Federal Reserve Bank continues to foresee a moderate economic recovery — so moderate that it plans to keep interest rates low for years.

More ominous are gas prices, which are at the highest level ever for this time of year and are continuing to rise. Soaring prices at the pump have soured consumer optimism numerous times.

Evidence of the vulnerability of consumer confidence showed up in The Conference Board’s Index of Leading Economic Indicators for January 2012, which was down compared to December 2011.

“Consumer Confidence retreated in January, after large back-to-back gains in the final two months of 2011,” said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement released 31 January 2012. “Consumers’ assessment of current business and labor market conditions turned more downbeat and is back to November 2011 levels.”

“Regarding the short-term outlook, consumers are more upbeat about employment, but less optimistic about business conditions and their income prospects,” Franco said. “Recent increases in gasoline prices may have consumers feeling a little less confident this month.”

But the economy has been down so long, even with dark clouds on the horizon, things apparently still look brighter.

Normally consumers’ perceptions of the economy improve, leading to increased consumer spending and overall economic recovery. Increasing consumer spending then leads to more jobs and hiring.

In this case, the improving job market conditions are making consumers feel better about the economy. It remains to be seen whether the strengthening job market can keep making consumers think the economy is recovering.

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