New year starts with hopeful outlook on hiring

Staff reports Updated: January 5, 2012 at 12:00 am • Published: January 5, 2012

WASHINGTON • The job market is looking a little brighter at the start of the new year.

Weekly unemployment benefit applications have fallen to levels last seen more than three years ago. Service companies grew a little faster in December. And many small businesses say they plan to add jobs over the next three months.

The mix of private and government data released Thursday sketched a picture of an economy that is slowly strengthening, stoking optimism one day ahead of the government’s important read on December job growth.

“Businesses have increased hiring to meet the underlying pick-up in (consumer) demand,” said Neil Dutta, an economist at Bank of America Merrill Lynch.

Weekly applications for unemployment benefits dropped to a seasonally adjusted 372,000 last week, the Labor Department said Thursday. That’s 11 percent lower than the same time last year.

Almost the entire descent occurred this fall. Applications had fluctuated sharply over the first nine months of 2011, falling as low as 375,000 and rising as high as 478,000. By early September, they were at 432,000 — only 5,000 below where they began the year.

Since then, applications have declined steadily. That has pushed the four-week average, which smooths fluctuations, to 373,250 — the lowest level since June 2008.

When applications consistently drop below 375,000, they generally signal that hiring is strong enough to reduce the unemployment rate.

U.S. service firms, which employ roughly 90 percent of the work force, grew a little faster in December, according to the Institute for Supply Management.

The trade group of purchasing managers said its index of non-manufacturing activity rose to 52.6. That’s slightly above November’s reading of 52 — the lowest in nearly two years — but well below last year’s high of 59.7 recorded in February.

Any reading above 50 indicates expansion.

Small businesses, meanwhile, remain encouraged about their plans to hire over the next three months. The National Federation of Independent Business says the proportion of those firms that expect to add workers is slightly off from the three-year high hit last month.

Economists are predicting that overall hiring increased in December and will strengthen this year.

John Ryding, an economist at RDQ Economics, forecasts that employers added 180,000 jobs last month, a big jump from November’s 120,000 net jobs.

Economists surveyed by the Associated Press project that the economy will generate an average of 175,000 jobs per month this year. That would be a step up from average monthly gains of 130,000 last year and 78,000 in 2010.

In November, the unemployment rate fell to 8.6 percent from 9 percent. Still, about half that decline occurred because many of the unemployed gave up looking for work. When people stop looking for a job, they’re no longer counted as unemployed.

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