(By Mani) As the economic activity appears to be limping into the final quarter of the year, the outcome of "fiscal cliff" set to play a significant role in jobs outlook.
With demand weak and uncertainty over the near-term outlook high, today's economic environment is not positioned for a significant accelerating pace of job growth in the coming months.
"Based on sluggish consumer spending, slower inventory investment and ongoing concerns over the fiscal cliff, we have recently downgraded our fourth quarter real GDP forecast to 1.0 percent from 1.4 percent," Wells Fargo economist Sam Bullard said in a client note.
At this point of time, experts see a favorable outcome on the federal budget negotiations that should avert the worst-case scenario, recession. That said, it should take some time for consumers and businesses to adjust to higher taxes and less federal spending.
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"We expect by the second half of the year, activity will have picked up substantially and the environment for hiring will be more favorable than it is today," Bullard noted.
Meanwhile, nonfarm hiring increased by 146,000 jobs in November and topped expectations with the Bureau of Labor Statistics (BLS) dismissing any substantial impact as a result of Hurricane Sandy. Joblessness fell to its lowest level since December 2008. Average hourly earnings rebounded, rising 0.2 percent last month following no change in October.
"After averaging nearly 161,000 jobs over the prior four months, markets expected payroll growth to pull back significantly in November, largely on the anticipated negative impacts from Hurricane Sandy," Bullard said.
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Indeed, the BLS noted, "Hurricane Sandy did not substantially impact the national employment and unemployment estimates for November."
By sector, gains were broad-based across service industries. On the positive side, retail proved to be the largest monthly contributor as retailers ramped up hiring ahead of the all-important holiday shopping season. Education & health and leisure & hospitality also added significantly during the month. Temporary help, which often leads full-time employment, posted solid gains for the second straight month.
On the downside, manufacturing slipped 7,000 jobs while construction shed 20,000 jobs in November.
"While the BLS notes that Sandy did not materially impact unemployment, the household survey does report a surge in people "unable to work due to weather," Bullard noted.
At 372,000, those unable to work last month are about five times higher than what normally occurs in November of each year. This surge helps explain the decline registered in household employment and the labor force which resulted in the unemployment rate declining to a near four-year low of 7.7 percent.