The Breakdown

Explaining Southern California's economy

January jobs preview: We could be facing an ugly number

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Friday morning, the Labor Department will release its jobs report for January. I'll be up at the crack of dawn in Southern California to write up the numbers when they hit, so join me in the darkness with a big cup of coffee or three.

The current U.S. unemployment rate is 7.8 percent. Private payrolls processor ADP, which generates an employment report ahead of the Labor Department, said that the country added 192,000 jobs in January.

Economists surveyed by Bloomberg expect 185,000. Both numbers are higher than what we wound up getting, on a preliminary basis, from the official government data in December: 155,000.

If ADP and the Bloomberg economist brain trust are right, then we're off to a decent start for 2013 — although to really push the unemployment rate lower in a hurry, we need to add 300-400,000 new jobs each month. 

Complicating this outlook for tomorrow is the fact that the U.S. economy stopped growing in the fourth quarter of 2012, a preliminary Commerce Department report indicated Wednesday.

That could have happened largely because of reduced defense spending and it may not affect the January hiring picture. But if there's no growth, it's harder to justify hiring. And right now, businesses feel an added squeeze between the fiscal cliff showdown and the upcoming debt ceiling debate. 

It is possible that businesses have wrung as much productivity as they can out of their existing workforces - and need to increase the hiring pace in 2013. I'm skeptical. And even though economists think the -0.1 GDP growth number for the fourth quarter could be a blip, to be adjusted for by sluggish but still positive growth in the first quarter of 2013 of around 2 percent, I don't like bad growth numbers. 

So I'm going out on a limb here. The January number is going to be a lot weaker than expected. If the economy adds 100,000 new jobs, we'll be lucky. And the unemployment rate will remain at 7.8. If it goes down, that will happen because the labor participation rate declined as even more Americans quit looking for work.

As a grim plus, if I'm right it'll signal a reversal of a two-year trend: we'll start the year with poor hiring and weak growth, rather than elevated growth predictions and hiring in the 200,00o-per-month ballpark. We may even slide into a brief recession, if the situation doesn't improve by summer. 

Follow Matthew DeBord and the DeBord Report on Twitter. And ask Matt questions at Quora.

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