December Job Growth Latest Bit Of Good Economic News

The end of 2011 saw some mildly encouraging economic news; home sales rose, holiday spending was robust and the stock market shook off European debt concerns and moved higher.

Today we learned that the all-important job market showed some improvement as well last month. The Labor Department reports the economy produced 200,000 new jobs in December and the jobless rate dropped to 8.5 percent.

While about 20 percent of the new jobs were seasonal in nature, economist Joel Naroff, of Naroff Economic Advisors, in Holland, Pa., finds a lot to be encouraged about.

"At least in December, companies began the process of rebuilding their workforces at a decent, though hardly robust pace," Naroff said. "The payroll gains were widespread. There were some large increases in seasonal sectors such as retail, warehousing and transportation."

The biggest news in the report was the decline in the unemployment rate to its lowest level in three years. Some of the decline can be attributed to people dropping out of the labor force. Some give up on their job search but others decide to return to school and some go into business for themselves.

Another positive element of the report was a rise in hours worked and hourly wages. That could be a good indicator for income growth, which has to pick up speed if demand and economic activity is to accelerate.

"Unfortunately, we need more like 300,000 jobs to get the unemployment rate coming down consistently and rapidly and that is not likely to happen this year," Naroff said. "Also, firms need to grow wages faster if consumption is to accelerate. There is not a lot of appetite to give raises. So while this is a good report, we need more of them and they need to get a lot better if the economy is to start expanding strongly."