The unemployment rate finally declined beneath the 7% threshold and reached 6.7% in December, according to the Labor Department’s Monthly Employment Report. However, the number of new jobs created was less than a third of the 241,000 jobs created in November. Only 74,000 new jobs were generated in the economy during December. Nevertheless, all other economic indicators are still very positive and broadly spread across the economy. This suggests the December employment report should be viewed as an aberration rather than a trend.
On Friday the Labor Department will release its latest report on employment and unemployment during the month of December. Most economic forecasters expect an okay report, but not one that is significantly better than the report in November. In fact, some are suggesting the unemployment rate may increase even from 7.0% to 7.1%, and the number of new jobs created might decline below 200,000. In contrast, I believe there’s every reason to be more optimistic than the average economic forecaster is. Based on the strong performance of the economy over the last several months, it is reasonable to expect more new jobs were created in December than the number in November (203,000), and the unemployment rate may fall below 7% for the first time in years. Why? Because virtually all important indicators, with the exception of automobile and truck sales, increased significantly over the last reporting period.