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U.S. economy creates 200,000 jobs, but Las Vegas hiring trails nation’s recovery

WASHINGTON — The nation added 200,000 jobs in December in a burst of hiring that drove the unemployment rate to its lowest in almost three years. The figures raised hopes that the economy might finally be healthy enough to power an even stronger job market.

Four years after the start of the Great Recession, which wiped out 8.7 million jobs, a Labor Department report Friday showed that the past six months have been the strongest for job creation in the United States since 2006.

The December gains, spread in industries throughout the economy and far better than economists had expected, sent the unemployment rate to 8.5 percent, the lowest since February 2009. It has fallen four months in a row.

"There is more horsepower to this economy than most believe," said Sung Won Sohn, an economics professor at California State University, Channel Islands. "The stars are aligned right for a meaningful economic recovery."

Though local experts say the Las Vegas economy has turned a corner toward improvement, with increasing retail sales and higher tourism volumes through 2011, the city’s jobs market continues to trail the nation’s employment recovery.

The state Department of Employment, Training and Rehabilitation will not release its December unemployment statistics until Jan. 23, but the Las Vegas Valley’s jobless rate in November was 12.5 percent. Experts say that level will not change much when the new numbers come out.

Steve Brown, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas, said he expects December’s regional jobless rate to stay steady from November. Any declines would be small, and likely trace back to discouraged workers dropping out of the labor force more than to increased job growth.

Brian Gordon, a principal in local economic research firm Applied Analysis, agreed that joblessness probably wouldn’t drop noticeably in the near term. That is because broader regional trends, including soft housing and construction industries and a slumping public sector, remain unchanged.

"The national report exceeded expectations, but it may be some time before we see any positive returns locally as a result," Gordon said.

Still, the latest report is good news for Las Vegas because it indicates the national economy is picking up — a prerequisite for a stronger tourism sector, Brown said.

MORE VICIOUS THAN VIRTUOUS

If economics textbooks and the best hopes of millions of unemployed Americans are confirmed, the nation’s economy may be at the start of what is known as the virtuous cycle — a self-sustaining, steadily improving pattern of hiring and spending.

When more Americans are hired, they have more money to spend. And when more money courses through the economy, businesses can justify hiring more people. That leads to more jobs and more demand.

Another pattern, known as the vicious cycle, took hold to devastating effect during the Great Recession. People lost jobs and spent less money, so businesses rang up fewer sales and were forced to lay off more people.

But Las Vegas is still more vicious than virtuous, local economists agreed. Sure, the city is reaping more tourism dollars, and that is helping the economy here, Brown said.

"But we don’t really have any local drivers right now, other than people being tired of the recession and spending on taxable sales," he said.

Added Gordon: "We have seen consumer spending pick up off the floor from two years ago, and that’s a welcome sign that discretionary spending is freeing up. But we’re still far removed from previous peak levels."

At current growth levels, the local unemployment rate is years from retreating to the national level.

More than 50,000 construction workers remain jobless here. The only thing that would help would be a building boom, and outside of North Dakota, there is really no construction revival anywhere in the nation, Brown said.

Gordon said that the local economy could create 20,000 jobs in 2012. But nearly 120,000 Las Vegans were out of work and looking in November, so 20,000 new positions would "barely dent" the jobless rate, he said.

In fact, don’t even count on seeing local joblessness drop to 10 percent in 2012, he added. And if modest population growth continues and discouraged workers re-enter the labor force on news of improving job growth, the local unemployment rate may not come down much at all this year.

LONG WAY FOR ECONOMY TO GO

The rest of the country also has much ground to make up.

"The labor market is healing," said Diane Swonk, chief economist at Mesirow Financial. She cautioned that "we still have a long way to go — years — to recoup the losses we have endured."

The economy added 1.6 million jobs in 2011. That is better than the 940,000 it added during 2010 and far better than the 5 million it lost during 2009, the most bruising year of the Great Recession.

But the nation still has 6 million fewer jobs that it did in December 2007, when the recession began. Economists forecast the nation will add 2.1 million jobs this year.

The unemployment report is the first released since Republicans began voting to determine a candidate to face President Barack Obama in an election sure to hinge on the economy.

Obama probably will face voters with the highest unemployment rate of any president running for re-election since World War II. Unemployment was 7.8 percent when he took office.

But the president’s re-election chances may hinge more on the direction of the unemployment rate. It was 7.2 percent when Ronald Reagan defeated Walter Mondale in 1984, but it had fallen from 10.8 percent two years before the election.

Obama, visiting the new Consumer Financial Protection Bureau, said: "We have made real progress. Now is not the time to stop."

He called on Congress to extend a Social Security payroll tax cut that is due to expire at the end of next month.

Campaigning in New Hampshire for Obama’s job, former Sen. Rick Santorum of Pennsylvania claimed credit for Republicans, suggesting the gains are tied to expectations that his party will win the White House.

"There’s a lot of concern still," added Santorum, who finished in a virtual tie with Mitt Romney in the Iowa caucuses earlier this week.

Another candidate, former House Speaker Newt Gingrich, dismissed the job gains as inadequate.

ENCOURAGING SIGNS

The report painted a picture of a broadly improving job market. Average hourly pay rose, providing people more money to spend. The average workweek lengthened, a sign that business is picking up and companies may need to hire soon.

The private sector added 212,000 jobs in December. Those gains were offset by 12,000 layoffs by governments.

Hiring increased across industries. Manufacturing added 23,000 jobs, as did the health care industry. Transportation and warehousing added 50,000 jobs. Retailers added 28,000. Even the beleaguered construction industry added 17,000.

Economists cautioned that some of the gains reflected temporary hiring for the holiday season. The government adjusts the figures to try to account for those seasonal factors but doesn’t always get it exactly right.

The gains in transportation and warehousing reflected a strong increase in hiring for couriers and messengers. That could be because of the jump in online shopping over the holidays, the Labor Department said.

And the economy still faces many challenges, including a likely recession in Europe exacerbated by the debt crisis there. That could drag on the U.S. stock market, making U.S. consumers feel poorer and weighing on their spending.

The Dow Jones industrial average finished down 56 points on Friday.

"While December’s data represent good news, there is no guarantee that January will follow a similar path," said Joshua Shapiro, chief economist at MFR Inc., in a note to clients.

The nation’s workforce, which includes both people working and those searching for jobs, shrank slightly in December and doesn’t look much different from last spring.

That is a concern because a strengthening job market normally draws more applicants. And if more Americans are motivated to start looking for work, the unemployment rate could jump again.

The government only counts people as unemployed if they are searching for jobs. Discouraged workers who have given up on looking are not included in the rate.

And some of those who are counted as employed are working part-time but would rather have full-time work.

A measure that includes those groups, the underemployment rate, was 15.2 percent in December. It has fallen three straight months but remains historically high.

In another positive sign, the number of people who are employed part time but would prefer full-time work fell for the third straight month. It has dropped from 9.3 million in September to 8.1 million in December, the lowest since January 2009.

A more robust hiring market coincides with data suggesting the economy ended the year with some momentum. Holiday sales were solid, and November and December were the strongest months of 2011 for U.S. auto sales.

Review-Journal staff writer Jennifer Robison contributed to this report.

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