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Are January’s Jobs Here to Stay?

By: 
Quentin Fottrell
Source: 
Smart Money
February 1, 2012

Hiring continued to increase in January, according to data released today, though economists warn that many of the new jobs were temporary positions.

The jobs numbers were in line with most forecasts: The private sector added 170,000 jobs in January, according to a national employment report published by payroll giant Automatic Data Processing Inc. and consultancy Macroeconomic Advisers. However, that’s down from a revised 292,000 jobs that were added in December, itself revised from an original ADP estimate of 325,000.

The figures show a similar pattern seen in December: Mom-and-pop business with less than 50 employees accounted for over half of the gains, hiring 95,000 people last month, while large companies with 500 or more staff hired just 3,000 new workers. “That’s carry-over from the holiday season,” says Mark Grant, managing director at Southwest Securities in Dallas, Texas.

There won’t be a clearer employment picture until at least February, analysts say, when retail and services seasonal hiring starts to drop out of the data. “If this jobs growth holds in February, I’d put more stock in that information that small business are feeling better about the economy and are about to hire more people,” Grant says.

Others say the temporary jobs go beyond seasonal hiring. With the Federal Reserve’s key rate close to 0%, people are spending, and jobs in retail and services are flourishing, says Peter Schiff, CEO of brokerage firm Euro Pacific Capital in New York: “How many of these types of jobs would be added if interest rates were allowed to rise to appropriate levels? When that bubble pops, those jobs will disappear.”

Unemployment, meanwhile, is on the rise, according to other data. The Congressional Budget Office says unemployment will hit 9.2% by the end of next year due to higher taxes and government spending cuts. “That’s a startling number,” Grant says. He says this doesn’t bode well for Bureau of Labor Statistics January unemployment estimate – currently 8.5% – which includes government workers, due Friday.

That said, January’s jobs data typically drop after the busier December holiday season, especially during a weaker economy when consumers save their dollars for the holidays, experts say. “We were on a pattern of mild job creation before December,” says Philip Noftsinger, president of CBIZ Payroll, a business services firm based in Roanoke, Va. “We’re going in the right direction, just very slowly.”

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