The Rearview Recovery

In December, according to the Bureau of Labor Statistics, the economy shed 84,000 jobs, dashing hopes that the nation's long employment nightmare has ended. But the report did contain one bit of succor for the employment sooner-rather-than-later crowd. The U.S. did, in fact, break its string of 23 straight months of job losses … in November, that is. The BLS revised the original report of 11,000 jobs lost in the 11th month to a gain of 4,000.

This speck of moisture in the long-running jobs drought highlights a larger dynamic in the economic data flow. The recovery, frustratingly slow as it seems, looks better through the rearview mirror than through the windshield. Consider how far we've come in the past year. The U.S. economy, which shrunk at a 6.4 percent annual rate in the first quarter, grew at a 2.2 percent rate in the third quarter. That's a turnaround of 8.6 percentage points in six months. Looking back, with the government having lifted many of its market guarantees, the price of the financial rescue was much smaller than originally thought—and it continues to shrink with every TARP repayment.

The same holds for employment. In the first quarter of 2009, employees cut an average of 691,000 jobs per month. But things have been looking up, or at least looking not so down, since the summer. And with each passing month, the recent past looks a little better. The BLS first reported October's job losses as 190,000. Last week, that were revised to a loss of 111,000—bad, but not nearly as bad. In coming months, December's loss of 84,000 jobs could easily be revised upward to a gain. Why? Job gains and losses are based on surveys: number crunchers plug data from employers into assumptions about what's happening in the economy at large. And for much of the past year, economists have underestimated the pace of the recovery.

What's more, the data points within the employment report that presage job growth continue to point in the right direction. Wages rose in December. Businesses hire temporary workers before they commit to long-term relationships with full-time workers. In December, 47,000 temporary jobs were added; since August, the number of such jobs has risen 10 percent.

Optimists can point to several pieces of employment-related data published in the first week of January that were overshadowed by the jobs report. Challenger, Gray & Christmas said job cuts in December were the lowest since December 2007. And the Conference Board said the number of online-advertised vacancies rose by 255,000 (7.5 percent) in December. Translation: less firing, more hiring.

Macroeconomic Advisers, which provides real-time economic tracking, estimates that the economy grew at a 4.9 percent rate in the recently completed fourth quarter. That would be the most robust period of growth since early 2006. But, as is the case with December's employment numbers, we won't know how strong (or weak) the economy was last month until the numbers are revised in February and March.

Daniel Gross is also the author of Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation and Pop!: Why Bubbles Are Great For The Economy.