Explaining Southern California's economy

January jobs preview: We could be facing an ugly number

A jobs sign hangs above the entrance to

KAREN BLEIER/AFP/Getty Images

A jobs sign hangs above the entrance to the US Chamber of Commerce building in Washington, DC.

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. 

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December jobs report: Did the U.S. economy add more than 200,000?

A jobs sign hangs above the entrance to

KAREN BLEIER/AFP/Getty Images

A jobs sign hangs above the entrance to the US Chamber of Commerce building in Washington, DC.

I don't have quite as much time as usual to look forward to the December jobs report the federal Labor Department will issue bright and early Friday at 5:30 a.m. West Coast time.

But I can run through what I think the number will be. 

For the record, in November the U.S. added 146,000 new jobs, while the unemployment rate fell to 7.7 percent.

On Thursday, ADP, a private payrolls processor, reported that the U.S. added 215,000 jobs in November. A consensus of economists Bloomberg surveyed expects 155,000 new jobs and anticipates that the unemployment will rise slightly, to 7.8 percent (probably because optimism about employment will bring people back to the job hunt, raising the labor participation rate, now at lows not seen since the early 1980s).

The economy itself is a mixed bag. Retail sales, for big players like Target and Barnes & Noble, were weak during the holiday season (although the jury is still out on whether the entire season was a major disappointment). But the U.S. economy expanded at a stronger pace in the third quarter than previously thought, suggesting that a very sluggish recovery from the Great Recession could be gaining steam.

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U.S. economy grows at a stronger pace in the third quarter

Labor Day Apparel - 12

Mae Ryan/KPCC

A worker moves finished fabrics at the Antex Corporation warehouse, which has operated in Los Angeles since 1973. Overal economic activity in the U.S. grew by a better-than-originally-estimated 3.1 percent in the third quarter.

The U.S. economy expanded at a pace of 3.1 percent in the third quarter, according to revised data released Thursday by the U.S. Commerce Department.

The growth in third quarter real GDP — the total economic output of the U.S. economy — has been revised up steadily since earlier this year. Today's 3.1 percent is more than full percentage point higher than the initial assessment of the economy by the Bureau of Economic Analysis. A second revision also pushed the number higher, to 2.7 percent.

In a nearly $16 trillion economy, there's a major difference between growing at 2 percent and growing at over 3 percent.

Economists have recently argued that 2 percent U.S. GDP growth could be a new normal for the economy as it emerges from the Great Recession. Historically, the economy has grown at a faster rate. But last year, it expanded at only a 1.7 percent annual pace, and since the financial crisis, it hasn't seen quarters in which GDP has grown at the typically 5-6 percent pace a recovering economy usually enjoys.

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Jeff Gundlach shows why US economic growth has become very expensive

The U.S. has added a huge amount of debt since the financial crisis, but it hasn't yielded higher levels of growth.

Southern California is home to a trio of important bond funds: PIMCO, TCW, and DoubleLine Capital. All of these have executives who routinely comment on the global financial system, although PIMCO and DoubleLine usually get most of the attention.

At Newport Beach based PIMCO, which manages $1.8 trillion, co-Chief Investment Officer Mohamed A. El-Erian acts as a sort of wise man for both his firm and for a variety of blue-chip news outlets (and the co-CIO and founder Bill Gross is a regular on CNBC and other financial broadcast outlets). 

Bond fund managers tend to be very macroeconomic and global in their outlook. They can see wheels within wheels and large-scale patterns because bonds are how countries, states, cities, and companies all fund themselves. If something is going right, bond markets can tell you. And if things are going to go wrong, bond markets can send the signals. Just ask Greece. Or California, which has one of the lowest credit ratings of any of U.S. state.

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CHART: November job report: US adds 146,000 jobs, unemployment rate falls to 7.7 percent

Job Fair Held In New York

John Moore/Getty Images

A student registers at the Barnard College Career Fair in New York City. TKTKTK

The U.S. added 146,000 jobs in November and the unemployment rate fell to 7.7 percent from 7.9 percent, the Labor Department reported on Friday.

There was concern going into the November report that Superstorm Sandy would have an effect on the jobs situation and the ability of the government to accurately gauge employment for the month, but the Bureau of Labor Statistics, which complies the data, says that it didn't: "Our analysis suggests that Hurricane Sandy did not substantively impact the national employment and unemployment estimates for November."

Given that concern, the fact that the economy added 146,000 new jobs in November is good news. However, it's important to remember that coming out of a recession as severe as the financial crisis, and with 12 million Americans unemployed and 4.8 million defined a "long-term unemployed," we need to see 300-400,000 new jobs added each month to be in a truly robust recovery.

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