Jobs Outlook: Cloudy With a Chance of Hiring

(March 30) -- It's the biggest economic and political question of the year: Will businesses start hiring again and get all those Americans who lost their jobs in the financial crisis back to work?

The short answer is that employment conditions seem to be improving but are still pretty bad.

The latest sign of recovery came Tuesday, when a monthly survey of consumer confidence showed a rebound of sentiment in March after falling in February. The Conference Board, a think tank for businesses, said its index of consumer sentiment rose to 52.5 this month after slipping to 46.4 in February. The survey of 5,000 U.S. households suggested Americans feel a bit better about current economic conditions and the country's future prospects -- but only so much.

"Despite this month's increase, consumers continue to express concern about current business and labor market conditions," said Lynn Franco, the Conference Board's head of consumer research. "And their outlook for the next six months is still rather pessimistic. Overall, consumer confidence levels have not changed significantly since last spring."

Since consumer spending makes up two-thirds of U.S. economic growth, and consumer confidence helps determine how much consumers will open their wallets, consumer confidence is considered one of the most important psychological factors in the economy.

The numbers inside the confidence report, like a host of other economic data, remain pretty weak.

Not So Bad, But Not So Good Either

Among the people surveyed by the Conference Board, those viewing conditions as "bad" decreased a couple of percentage points to 42.8 percent. But while those viewing conditions as "good" increased the same amount they were only at 8.6 percent. Pessimism on the employment front lessened a bit, with those saying jobs are "hard to get" declining a couple percentage points to 45.8 percent. The share of people viewing jobs as "plentiful," however, was barely changed at just 4.4 percent.

Similarly, the Labor Department said last week that the number of mass layoffs reported in February was down from January, but that 1,570 mass layoffs -- when a single employer fires at least 50 people at once -- still took place, with 155,718 workers losing their jobs in those actions.

The department also said last week that its four-week moving average of new claims for unemployment insurance had fallen by 11,000 to 453,750. That's still much higher than the weekly level of 300,000 jobless claims associated with a healthy labor market.

And the Federal Reserve's Beige Book, a regular gathering of anecdotal reports from the business and banking contacts of the regional Fed banks, found that "the pace of layoffs slowed in most districts, but hiring plans still remained generally soft."

Waiting for Friday

The mixed message in the data clouds what's already a seemingly circular bit of economic logic: Consumers need to feel safe in their jobs in order to spend more, more spending needs to take place for businesses to feel confident enough to increase their payrolls again, and until that hiring starts on a broad scale, workers aren't going to feel safe and confident enough to increase their spending.

At the start of an expanding economy, each of those steps takes place haltingly and then picks up, but sustained growth is hard to see until things really get going. And more often than not, economists have a tough time predicting when that will happen. At the end of the last recession, most economists spent nearly half a year predicting significant hiring, only to be disappointed. It was only when consensus forecasts got less rosy, in early 2004, that payrolls finally began to expand.

The next report on U.S. payrolls and employment comes out Friday, as it does the first Friday of every month. A Bloomberg survey of economists produced a median forecast for the biggest increase in payrolls in three years.

Economists won't be the only people watching it closely. The Obama administration and congressional Democrats -- like incumbents from any period -- know their fate in the November midterm elections will depend as much as anything else on the job market and what the headlines will say following the first Fridays of the next seven months.