December Jobs Report and the Economic Triple Threat

December – The US economy is facing a triple threat: fallout from the European sovereign debt crisis, the stalemate in Washington surrounding the budget deficit, and consumer and investor uncertainty. Despite these looming crises, the economy has managed to crawl along at a 2% rate of growth. Retail sales during the Thanksgiving holidays indicated that consumers are ready to vent their pent up demand and spend more. However, the fragile recovery and the willingness of consumers to spend may be dashed if the jobs report turns out to be anything but encouraging. Adding to the high expectations, economists in recent days have increased their estimate of the number of new jobs that were created in November. Given the high expectations, a disappointing jobs report will be a major blow to market confidence.

What would be a disappointing number? Any number that is smaller than 100,000 new jobs created. An encouraging report would be one showing that 150,000 or more jobs were created in November. Any value between these two values will is barely enough to accommodate the normal increases in the labor market, and not enough to put a dent in the unemployment rate, which hovers at 9.0%.

Recent economic indicators have been encouraging. The ADP Small Business Report estimated that 206,000 jobs were created in November. Another encouraging sign is that consumer confidence increased notably during the month of November. While the growth rate of the economy is slow overall, growth in fixed investment and especially equipment and software investment has reached almost 16%. This type of investment will ultimately lead to greater productivity gains and pave the way for more rapid economic growth in the future.

Here are some positive signs to look for, which would indicate that the economy is on the mends?

• 140,000 or more new jobs created
• 8.9% unemployment rate (unless it is held back by a large number of discouraged workers reentering the labor market market)
• 250,000 or larger reduction in the number of persons working part-time for economic reasons
• 200,000 increase in the size of the civilian labor force