The job market may be turning around, however slowly. In November the U.S. economy added a record-breaking private sector 297,000 positions, and 2010 proved to be the lowest year for firings in 13 years, according to two separate reports released today.
The ADP National Employment Report, which measures private-sector employment, indicated that job growth rose at a rate in November "well above what is usually associated with a declining unemployment rate," the firm said in a release. A separate report, issued by the outplacement consulting firm Challenger, Gray & Christmas, showed national job cuts this year fell to the lowest level since 1997. Both reports come prior to Friday's more comprehensive BLS report on the labor market.
Goldman Sachs' U.S. research team was bullish about the decline in job cuts in an analysis released today, claiming that "A drop in initial [jobless] claims as big as that seen since August 2010 has thus always been followed by a notable pickup in hiring -- and the end of 'labor market recessions.'"
Edmund Phelps, an economist at Columbia University, agreed that a decline in firings is almost always positive news for hirings. "I don't remember a historical episode in which things were improving on the firing said and weren't improving on the hiring side," he said.
So is the end of the unemployment crisis really at hand? According to Heidi Shierholz, an economist at the Economic Policy Institute, not so much. Assesing the job market recovery from the August peak in unemployment claims, as Goldman Sachs' research team did, is flawed, she said. "I would never go from the August peak," Shierholz told us. "Unemployment claims are definitely coming down now, so that's true. But to the extent Goldman Sachs' enthusiasm for recovery is based on the drop since August, I think it's overstated."
Shierholz was also skeptical of the 297,000 new jobs claimed by the ADP Report. "It's very surprising," Sheirholz said. "I thought private sector growth would be 140,000. So it's roughly a litte more than twice what I expected."
The ADP report has been off the mark in the past, but even if these numbers do prove accurate come Friday's BLS report, there may not be much reason to celebrate yet: "Even jobs growth this high doesn't mean the unemployment rate will see huge improvement." Sheirholz added, "If we get that kind of growth, and it's sustained, that would be great news. But even if we get this fast growth, and it is sustained, the hole we are in is so profound that it still will take us five years to get down to a pre-recession unemployment rate."
Ian Shepherdson, the Chief U.S. Economist at High Frequency Economics also cautioned about reading too much into the ADP report. "We are inclined to see the ADP number as a fluke perhaps driven by surging temporary retail jobs." Shepherdson wrote in an email circulated today. "If we're right, we should see a strong official payroll number on Friday but a clear give-back in January."