Happy New Year!

The Lehmann Letter (SM)

The New Year is off to a good start. Most economic indicators are looking up and a spirit of optimism prevails.

Tomorrow morning the Bureau of Labor Statistics will release its December employment report. Popular interest will focus on the unemployment rate, but most economists will direct their attention to the number of jobs created. Anything over 100,000 will bring a smile; over 200,000 will generate a big grin.

As population and the labor force grow, the economy must generate 100,000 jobs per month just to keep the unemployment rate from rising. An increase of more than 200,000 will reduce the rate. And keep in mind that jobs must also be found for the discouraged workers who have left the labor force but will return to it as the unemployment rate falls. So it's a complicated mix that causes the unemployment rate to wobble month-to-month. What we are hoping for: Solid job gains month after month, year after year, that will finally drive the unemployment rate below 5%. Then, and only then, can we relax and say that full employment has returned.

So we will all look expectantly at tomorrow's job-growth number, hoping that a robust report will mean a happy new year for those hurt most by the recession.

© 2011 Michael B. Lehmann