WASHINGTON — The economy is starting to fire on almost every cylinder these days except the one that matters most: Job creation.
Factories are busier. Incomes are rising. Autos are selling. The holiday shopping season is shaping up as the best in four years.
Stock prices are surging. And many analysts are raising their forecasts for the economy’s growth. Goldman Sachs, for instance, just revised its gloomy prediction of a 2 percent increase in gross domestic product in 2011 to 2.7 percent and forecast 3.6 percent growth for 2012.
“The upward momentum has more traction this time,” says James O’Sullivan, chief economist at MF Global.
If only every major pillar of the economy were faring so well.
Despite weeks of brighter economic news, employers still aren’t hiring freely. The economy added a net total of just 39,000 jobs in November, the government said earlier this month.
That’s far too few even to stabilize the unemployment rate, which rose from 9.6 percent in October to 9.8 percent last month.
Unemployment is widely expected to stay above 9 percent through next year, in part because of the still-depressed real estate industry.
Job creation ultimately drives the economy, and it remains the most significant weak link.
The meager job gains for November confounded economists. They’d expected net job growth to reach 145,000 and for the unemployment rate to stay at 9.6 percent.
Some economists dismissed the November data as a technical fluke, a result of the government’s difficulty in adjusting the figures for seasonal factors. They think the number will be revised up later.
Others saw the jobs report as a reminder that the economy is still struggling to emerge from an epic financial crisis that choked off credit, stifled spending and escalated a “normal” recession into the worst in 70 years.
“The fits and starts are not surprising,” says Jack Kleinhenz, chief economist at the National Retail Federation. “We’ve had a unique recession and therefore a unique recovery.”
In the view of most economists, the direction of the overall economy remains positive — even if its pace feels agonizingly slow.
The latest unemployment report was a setback, but likely a temporary one, they say.
Unemployment could soon rise above November’s 9.8 percent rate, especially if an improving economy causes more out-of-work people who aren’t looking for jobs to start.
Encouraging economic signs
CONSUMER CONFIDENCE
Spending fuels about 70 percent of the economy, and the Conference Board’s index of consumer confidence rose in November to the highest level since June.
CREDIT
Banks have eased lending standards since July, the Federal Reserve reports, and borrowing by businesses rose from July through September.
RETAIL
The holiday shopping season got off to a buoyant start, with the National Retail Federation expecting sales to rise 2.3 percent this year, the best performance since 2006.
FAMILY FINANCES
Personal income surged 0.5 percent in October, and households cut debt to 122 percent of annual disposable income in the April-June quarter.
PROFITS
Corporate earnings rose nearly 28 percent in the third quarter from a year earlier, and companies amassed a record $1.84 trillion in cash as of June 30, according to the Federal Reserve.
