December Jobs Report

155,000 jobs were created in December. The number is incredibly average for the disappointing recovery. The monthly average for 2012 was 152,900; the average for 2011 was 153,300. Such weak and consistent job growth puts the economy on track to recover all the jobs lost in the recession by March of 2015. But the population will be larger, so recovery to the rate of unemployment seen before the recession will take even longer.

The jobs report raises the question of what would have happened without the uncertainty of the fiscal cliff hanging over the economy. Many sources pointed to lower/delayed hiring due to the fiscal cliff. But the effect of uncertainty is often over-stated, and if the level of uncertainty is stable (such as continuous political brinkmanship that has always ended in a deal right before the deadline) then markets will adjust to and seemingly ignore continued uncertainty[1]. An average number like December’s might indicate that uncertainty didn’t have much of an effect.

On the other hand, hiring since the recession has consisted of strong winters and weak summers (see graph). The pattern was never explained, and its apparent disappearance could be for many reasons, including more accurate seasonal adjustments by the BLS. But it is an interesting coincidence that the uncertainty of a huge hit to the economy happened at the same time as the strong winter job growth pattern was broken. The uncertainty remains, and who knows what will happen next month.

1.  But the equilibrium growth in the face of stable uncertainty about a negative possibility is less than if a positive outcome were more certain.