South By North Strategies, Ltd.

CHAPEL HILL (January 7, 2010) – The national employment situation improved somewhat in December, as employers added 103,000 more payroll positions than they eliminated. While that gain contributed to a fall in unemployment, a troubling drop in the size of the labor force accounted for almost half of the decline.

“The December employment report was a somewhat positive one,” said John Quinterno, a principal with South by North Strategies, Ltd., a research firm specializing in economic and social policy. “While total payroll employment rose due to some private-sector hiring in a few industries, the gain was far short of the level needed at this point in the recovery.”

In December, the nation’s employers added 103,000 more payroll positions than they cut. Gains occurred exclusively in the private sector (+113,000), while government payrolls fell by 10,000 positions due chiefly to cuts at the local level (-20,000). Additionally, the payroll employment numbers for October and November were revised upwards; with the revisions, the economy gained 281,000 jobs over those two months rather than the 211,000 positions previously reported.

Private-sector gains in December occurred almost entirely in leisure and hospitality services (+47,000, mainly in the food services sub-industry) and education and health services (+44,000). Private-sector losses occurred in construction (-16,000) with all other private-industry groups experiencing few or no changes in December.

“The December employment report offered little evidence that a robust jobs recovery is taking hold across the county,” noted Quinterno. “The current pace of growth, while positive, will not produce the jobs needed to accommodate all those Americans who want work.”

Weak conditions were reflected in the December household survey. Last month, 14.5 million Americans (9.4 percent of the labor force) were jobless and seeking work. While the number of unemployed Americans and the unemployed rate fell last month ( -556,000 positions and -0.4 percentage points, respectively), the share of the population participating in the labor force (64.3 percent) reached the lowest level recorded since the early 1980s. In December, some 260,000 Americans simply left the labor market.

Last month, proportionally more adult male workers were unemployed than female ones (9.4 percent vs. 8.1 percent). Similarly, unemployment rates were higher among Black (15.8 percent) and Hispanic workers (13.0 percent) than among White ones (8.5 percent). The unemployment rate among teenagers was 25.4 percent. With the exception of teenagers, unemployment rates for every major demographic group were lower in December than in November.

Furthermore, 8.3 percent of all veterans were unemployed in December; the rate among recent veterans (served after September 2001) was 11.7 percent.

“The job market ended 2010 on a mixed note,” added Quinterno. “While net job growth was positive and was boosted by upward revisions to previous months’ estimates, reductions in public sector payrolls are weighing on the job market. Especially worrying is the fact that a smaller share of the civilian population is participating in the labor force, as many Americans unable to find positions have abandoned the job market altogether. That was an important reason why the unemployment rate fell in December.”

Jobs remained difficult to find in December. Last month, the underemployment rate equaled 16.7 percent. Among unemployed workers, 44.3 percent had been jobless for at least six months with the average spell of unemployment lasting for 34.2 weeks.

“The December employment report offers much proof that the labor market is not healing itself,” observed Quinterno. “The modest pace of growth is too sluggish to reverse the problem of joblessness, especially long-term joblessness. Unless more attention is paid to the problem and more aggressive action taken, millions of Americans run the risk of being pushed permanently out of the job market.”