Encouraging as the latest figures are, hopes for a robust finish to 2013 hinge on strong hiring. And that depends, in part, on what the government’s November jobs report shows when it is released today.
The recovery from the Great Recession that ended 4½ years ago has come in fits and starts. Unemployment remains high at 7.3 percent. And growth has yet to reach the acceleration that defined U.S. economic recoveries for much of the past half century.
Even Thursday’s government report that the economy grew at a robust annual rate of 3.6 percent from July through September was hardly cause for celebration.
Nearly half the growth came from businesses building up their stockpiles, a temporary factor. Excluding stockpiling, annual growth last quarter was a mere 1.9 percent.
Unless consumers step up spending during the holiday season, stockpiling is likely to slow.
Most economists foresee a sharp slowdown in growth during the October-December quarter as businesses do less stockpiling. Early estimates for economic growth are at or below an annual rate of 1.5 percent.
Paul Ashworth, chief U.S. economist at Capital Economics, cautioned that a drop in fourth-quarter growth might not necessarily signal a weakening economy. Ashworth noted that the report on third-quarter growth showed that business sales surged, corporate profits rose, income grew and Americans saved more.
The report adds “to the evidence that the recovery is gaining momentum,” Ashworth said.
To sustain that strength, the economy needs more jobs. On Friday, the government will show whether steady gains in hiring over the past few months continued in November.
“It’s the one number that can come out and be 180 degrees in the opposite direction of what you thought,” Rupkey said.
The economy has added a solid average of 202,000 jobs a month from August through October. And the number of people applying for unemployment benefits has fallen over the past month back to mid-2007 levels. That signals fewer layoffs and further job gains in November.
Job growth has a dominant influence over much of the economy. If hiring continues at the current pace, a virtuous cycle starts to build. More jobs usually lead to higher wages, more spending, and faster growth.
Stronger corporate profits this year might also enable the creation of higher-paying jobs. More than half the jobs that have been added in the past six months have come from four low-wage industries: retail; hotels, restaurants and entertainment; temp jobs; and home health care workers.
The Federal Reserve has pegged its stimulus efforts to the unemployment rate. Fed chairman Ben Bernanke has said the central bank will ease its monthly purchases of $85 billion in bonds if hiring improves consistently.
In fact, expectations that the Fed will pull back because of the stronger economy led the stock market to drop slightly Thursday.
But the unemployment rate can also fall for the wrong reason: When people quit looking for a job, the Labor Department stops counting them as unemployed.
This trend could soon affect the monthly jobs reports. A federal program that extends unemployment benefits is set to expire at the end of the year, which would cause 1.3 million jobless Americans to immediately lose their benefits.
Michael Feroli, an economist at JPMorgan Chase, estimated that the unemployment rate could drop by a quarter-point to a half-point if extended benefits expire.
That’s because recipients of unemployment aid must look for new jobs to obtain benefits. Economists think many recipients would stop job-hunting if their benefits expired.
The recent economic upturn has been surprising. Many economists expected the government shutdown in October to hobble growth. Yet the economy motored along without much interruption, according to several government and industry reports.
Early reports on holiday shopping have been disappointing. The National Retail Federation said sales during Thanksgiving weekend — probably the most important stretch for retailers — fell for the first time since the group began keeping track in 2006.
But those estimates exclude autos, home sales and movies, three major consumer categories. Autos sold in November at their best pace in seven years, according to Autodata Corp. New-home sales in October bounced back from a summer downturn.
And box office receipts shot up over Thanksgiving weekend, after the release of “The Hunger Games: Catching Fire” and the animated film “Frozen.”
Stuart Hoffman, chief economist for PNC Bank, downplayed concerns that holiday sales might be sluggish and said consumer spending should still boost the economy.
“Consumers,” he said, “once again, their demise has been greatly exaggerated.”