Job Growth

While a sharply lower unemployment rate was a welcome surprise, some experts said that drop was mostly due to a shrinking workforce.

"A lower unemployment rate is a mixed blessing," John Silvia, chief economist at Wells Fargo said in a note. "Yes, we are getting more people employed but we appear to be losing people into the woodwork -- not a good sign long term."

Economists surveyed by CNNMoney were expecting the unemployment rate to ease to 9.7%, from 9.8% in the previous month.

The payroll number was a clear disappointment. Economists predicted a gain of 150,000 jobs, and many had boosted their forecasts earlier in the week, after private payroll processor ADP released a shockingly strong report.

While that report is often seen as a bellwether for the Labor Department's number, this is the second month in a row that the government figures came in disappointingly lower.

0:00/4:18Who's getting hired

Because temporary holiday hiring is typical for the end of the year, the raw numbers are seasonally adjusted to account for those extra jobs. But since the recession, economists have struggled to account for new changes in consumer and business behavior, which may have distorted the figures and caused volatility in the various readings.

"What we're using is patterns from previous years to adjust this year's numbers, and in a dynamic economy that is not going to always work," said Stephen Bronars, a senior economist with Welch Consulting.

According to Friday's report, businesses added only 113,000 jobs to payrolls in December. The government continued to shed staff, cutting 10,000 workers.

October was revised up to 210,000. November was revised up to 71,000, slightly better than economists' forecasts for a revision to 62,000.

More jobs, but fewer workers

While the payroll number stems from a survey of employers, the unemployment rate comes from a household survey. It includes only workers who are actively looking for jobs, and not the so-called "discouraged workers" who have given up their job searches.

Discouraged workers in December ticked up to 1.3 million, with those workers falling off the the unemployment rate calculations.

0:00/3:33Job market's slow take-off

About 260,000 adults dropped out of the labor force for various reasons, and were no longer counted as unemployed by the government. The overall participation rate in the U.S. labor force fell to a new recession low of 64.3%.

"Incredibly, the U.S. labor force is now smaller than it was before the recession started, though it should have grown by over 4 million workers to keep up with working-age population growth over this period," said economist Heidi Shierholz of the Economic Policy Institute.

While positive job growth still brings some hope for 2011, there's still a long way to go to recover the 8.5 million jobs lost since the Great Recession began.

Teens and blacks face highest unemployment

The labor market typically needs at least 300,000 to make a difference in the unemployment rate, economists say, and at least 150,000 to keep pace with population growth.

Overall, the economy rounded out 2010 with 1.1 million jobs added, the best year for hiring since 2007. And job growth is still trending upward, albeit very slowly, with an average of 128,000 jobs a month added in the last quarter of the year.

"The message here is, we are seeing improvement, and it's a report that hints at more future strength," said economist Robert Brusca of FAO Economics. "The glass may only be half full, but it is at least half full." 

Job GrowthGood jobs vanish, may never return

Inflation (CPI)

While the increase is a sign that the economy is picking up steam, higher prices can eat into the purchasing power of Americans at a time when unemployment is still high and wages are barely growing.

"It is disconcerting that inflation is starting to accelerate, and you have to wonder, with gas prices moving above $3 a gallon, whether the rate of inflation will continue to escalate," said Bernard Baumohl, chief global economist with The Economic Outlook Group.

Even though American consumers are beginning to feel the pain of surging commodity prices at the gas station, they're still not feeling it at the grocery store, where prices ticked up a mere 0.1% during the month.

Sooner or later, economists argue, producers will have to pass on the cost of rapidly rising agricultural prices, which surged more than 60% in the second half of 2010.

Core CPI, which strips out volatile food and energy prices, is still at a historic low, after rising a mere 0.8% for the entire year, and only 0.1% for the month.

Rising prices around the globe

While prices are increasing worldwide, U.S. inflation still lags behind that of its major trading partners.

The euro zone recently reported its CPI rose 2.2% in 2010, while China's CPI rose 5.1% in the 12 months ending in November.

Stripping out some of the volatile components, the three are much closer in line, with Europe reporting a 1.1% increase in core inflation for the year, and China reporting a 1.9% increase in inflation, minus food prices.

"In general, what you're seeing is the U.S. has the lowest rate of inflation, although not way out of line," said Jay Bryson, global economist with Wells Fargo.

Meanwhile, central banks around the world are pursing different policies to combat inflation.

In November, fears of sluggish inflation led the U.S. Federal Reserve to initiate a controversial $600 billion bond-buying program to stimulate the economy. Critics have argued that the move, referred to as quantitative easing, may cause inflation to rise too rapidly.

"If the economy is growing on its own, is it really a good idea for the Fed to continue to pursue quantitative easing?" Baumohl said. "The concern is now, the Fed may be behind the curve, as far as controlling inflation down the road."

China's economy, on the other hand, is hurling ahead so rapidly that its central bank is trying to ease on the brakes. After hiking interest rates twice last year, the People's Bank of China raised the level of reserves banks are required to hold to a record high on Friday.

It marked the seventh time in the last year that the bank has used higher reserve standards to try to pull money out of the economy and tame rising prices.

0:00/05:08The Fed's inflation hawk

Europe, on the other hand, is struggling with a debt crisis and a much slower economy than the emerging markets. But its inflation numbers came in greater than expected in 2010, leading European Central Bank President Jean-Claude Trichet to turn slightly more hawkish on global inflation on Thursday.

Noting the rapid growth in emerging markets, he indicated rising inflation could be a worldwide threat going forward.

"Inflationary threats present some kind of general feature in the emerging world; it's something you don't see necessarily in advanced economies," Trichet said. "It's clear that it is extremely important that we all keep control of inflation expectations, and that calls for appropriate decisions."

The comments led some traders to forecast an ECB interest rate hike sooner than originally expected. 

Inflation (CPI)Fed’s hand strengthens on tame inflation data

Job market looks stronger ahead of Friday report

A separate report showed planned job cuts increased in January, which is not unusual for the first month of the year. But it was the lowest number of January job cuts on record.

Employers announced plans to cut 38,519 jobs in January, a 20% increase over December, according to outplacement consulting firm Challenger, Gray & Christmas. The level indicates that the low downsizing rate from late last year may very well continue into 2011.

"It is not unusual to see job cuts increase in January. In fact, 2011 marks the fifth consecutive year and the tenth out of the last twelve in which January job cuts surpassed the December total," said John Challenger, CEO of Challenger, Gray & Christmas in a statement. "What made this January figure so unusual is that it was so low."

According to Challenger's data, January is the worst month on the calendar for layoffs. From 1993 through 2010, employers announced an average of 104,560 job cuts to start the year.

The ADP and Challenger reports typically set the tone for the government's highly anticipated monthly employment data, due Friday.

While both reports signal solid job growth for the month, economists still say the recovery will continue to be slow over the next year.

"You're going to see a better hiring picture as a whole in 2011," said Tim Quinlan, an economist with Wells Fargo. "We hired just over a million total jobs last year, and you'll probably see that number creep up."

"The problem is that improvement won't be enough to make a substantial change in the unemployment rate this year," he added.

Economists are also cautious about completely trusting the ADP and Challenger reports. For the last six months, the ADP figure has missed the government's reading on private payrolls by an average of 96,000 jobs, said Jennifer Lee, an economist with BMO Capital Markets.

Ahead of the Friday jobs report, economists surveyed by CNNMoney are predicting the economy added 149,000 jobs and the unemployment rate ticked up to 9.5% in January. 

Stores beef up staffs for holiday seasonMore mixed signals for jobs

NY governor proposes sweeping cuts

In keeping with his campaign pledge, the governor is not calling for a tax increase, instead he is looking to improve collections and enhance the lottery.

Cuomo is proposing reducing school aid by $1.5 billion, or2.9%, and Medicaid by $982 million, or 2%. A 27-member Medicaid redesign team would offer cost-savings suggestions by March 1.

Education and Medicaid are the largest drivers of state spending. State law uses formulas to set the budgets in those areas, which would have resulted in 13% increases for each in the coming year. Cuomo,a Democrat, made headlines Monday by calling attention to these automatic increases and labeling the budget process "a metaphor of Albany dysfunction."

"New York is at a crossroads, and we must seize this opportunity, make hard choices and set our state on a new path toward prosperity," said Cuomo, calling the state "functionally bankrupt." "We simply cannot afford to keep spending at our current rate."

0:00/2:02New governors, big budget problems

Without these automatic increases, the budget gap would be only $1 billion, he said.

Just one month into his term, Cuomo is taking a hard line with lawmakers. During his budget address Tuesday, he exhorted legislators to do what's best for New Yorkers and not for the "Albany establishment."

"It can't go on because it's unsustainable," he said, blasting groups ranging from home health care agencies to school superintendents for bloated bureaucracies. "We have to change."

Change, however, has never been easy for state legislators, who are also notorious for passing budgets well after the start of the fiscal year on April 1. And Cuomo can't implement his spending plan until lawmakers approve it, likely with many changes.

Senate Majority Leader Dean Skelos, a Republican, had a generally positive reaction to Cuomo's address, his spokesman said. The GOP agrees with cutting spending and holding the line on taxes.

"By making the tough decisions now, we can reform the way government operates and make New York a place where businesses want to stay, grow and create new private sector jobs," Skelos said.

Democratic leaders in the Assembly are still digesting the budget proposal and plan to start hearings on it next week. Assembly Speaker Sheldon Silver called Cuomo's proposal "a great first step." He said his goal is to try to minimize the pain and cut from administration rather than services, but it will be difficult.

"We just don't have the money. It's as simple as all that," Silver told CNNMoney.

Both lawmakers said they felt the budget could be passed by April 1.

Cuomo is the latest governor to push for harsh spending cuts in the wake of the Great Recession. States and municipalities are still facing reduced tax revenues, forcing them to reduce spending on government-supported programs.

What's worse, states are contending with the end of federal stimulus funding, which propped up state aid for education and Medicaid. Governors are looking to close budget gaps for fiscal 2012 that could total as much as $125 billion, according to some estimates. The new fiscal year starts July 1 in most states.

For New York, the loss of federal Recovery Act funding is blowing a $6 billion hole in the state budget, Cuomo said.

Across the board cuts

Cuomo's plan also calls for eliminating 3,500 prison beds and downsizing youth detention and psychiatric facilities. He also wants to slash higher education funding by 10%, cutting $185.5 million in state aid for the senior colleges of the State University of New York and the City University of New York.

Local aid would fall by 2%, or $32 million, for cities, towns and villages, excluding New York City. The state would also save $302 million by withholding aid to the Big Apple, which was set to start this coming year.

N.Y. governor unveils emergency debt plan

The state also plans to lean heavily on its employee unions, many of which will see their contracts expire when the new fiscal year starts on April 1. If concessions aren't made, Cuomo said as many as 9,800 workers could lose their jobs.

Reducing personnel costs is a major component of Cuomo's plan to cut the cost of state operations by 10% at each agency.

The governor is also looking to merge or consolidate several state agencies, as well as reduce the number of agencies, authorities and commissions by 20% over the longer-term.

Cuomo is also offering schools and local governments bonuses to prod them to become more efficient and to improve performance.He questioned why 279 superintendents make more than $200,000 in salary and benefits, more than the governor earns.

"You don't just sit there and I'll send you a check ... you will actually have to do something for the money," he said.

Has your income fallen over the last few years? Did you take a pay cut, or have to find a new job that pays less than your old one? Tell us about it and you could be included in an upcoming story on CNNMoney. For the CNNMoney Comment Policy, click here .  

Mass. budget cuts: Biggest in 20 yearsUT report: Job growth expected, but not robust increase in state

Jobs are back! But the pay stinks

"Growth has been concentrated in mid-wage and lower-wage industries. By contrast, higher-wage industries showed weak growth and even net losses," said Annette Bernhardt, policy co-director for the National Employment Law Project. She said that growth has been far more unbalanced than during previous job recoveries.

Bernhardt's analysis of the first seven months of 2010 found that 76% of jobs created were in low- to mid-wage industries -- those earning between $8.92 to $15 an hour, well below the national average hourly wage of $22.60.

But the biggest problem is continued job losses in higher-wage industries severely hit by the bursting of the housing bubble -- construction and financial services. Recoveries in those sectors helped lead the economy out of earlier downturns, but they're still suffering more than a year and a half after the official end of the Great Recession.

High-wage sectors -- made up of jobs that pay between $17.43 and $31 an hour -- accounted for nearly half the jobs lost during the recession, but have produced only 5% of the new jobs since hiring resumed, Bernhardt's study showed.

Best Companies to Work For: In employees' words

Even in some of the higher-wage industries that are hiring, it's lower-wage occupations within the sector where the jobs are being added, according to William Rodgers, chief economist for the Heldrich Center for Workforce Development at Rutgers University.

Case in point: Professional and business services sectors gained a healthy 366,000 jobs in 2010. Workers in that sector earned $27.23 an hour, on average, in 2010. But almost all of the new jobs -- 308,000 -- came in temporary help services, where the average hourly wage was only $15 an hour.

And those temporary jobs accounted for nearly one in four jobs created by all types of businesses last year.

"This recovery is being driven very much by temp employers," said Rodgers.

Will it last?

A big worry is whether the trend toward low-wage jobs will continue. Experts say it's too soon to tell.

But the Bureau of Labor Statistics has made some worrisome projections about the pay for jobs likely to be created.

The BLS's most recent job growth forecast, published back in November 2009 and projecting the job market from 2008 through 2018, identified 30 different occupations expected to experience the best growth.

0:00/5:47CEOs: We want to start hiring

The good news is that the occupation expected to add the most jobs over those 10 years -- registered nurse -- is considered "very high wage." But the six occupations with the largest gains are all classified as either "low wage" or "very low wage." Among those jobs are home health aides, retail sales people and food preparation -- including fast food workers.

Overall, 55% of the jobs growth forecasted in the 30 fastest-growing occupations identified by BLS, are considered to be low- or very low-wage.

The greater number of low-wage jobs shouldn't be a surprise, said Kristina J. Bartsch, chief of occupational outlook for BLS, simply because higher-wage occupations are always going to be in the minority. Some of the jobs projected to enjoy the fastest pace of growth are very high-wage.

For example, network systems and data communications analyst jobs are projected to increase by more than 50%, but they are still only a small portion of the workforce.

"By and large, occupations that are more high skill, and have high wages, are fast growing," she said. "They're just not as huge as waiters and waitresses."

Did you get a low-paying job in 2010? Tell us about it and you could be included in an upcoming story on CNNMoney. For the CNNMoney Comment Policy, click here .  

Job GrowthGood jobs vanish, may never return

Federal Reserve toes the line

"This is the same language," said economist Robert Brusca with FAO Economics. "The language of disappointment from the Fed."

The anticlimactic decision was unanimous among all 11 members of the Fed's voting committee, including the four newest voters.

It's no shocker that the Fed would stand pat on the fed funds rate, which has remained at historic lows near zero since 2008.

When the central bank first announced its bond buying policy, known as quantitative easing last November, the Fed promised to reevaluate as necessary.

And with a few more hawkish voting members rotating in this year, some had questioned whether the Fed would proceed full speed ahead.

Meet the new Federal Reserve

Several of the new voting members are considered inflation hawks, and have publicly spoken out against quantitative easing, fearing that the flood of easy money could lead to rising inflation. Among them, Philadelphia Fed President Charles Plosser and Dallas Fed President Richard Fisher are the most vocal.

Prior to Wednesday's meeting, Fed watchers speculated as to whether either Fisher or Plosser would take a formal stand, officially dissenting at the meeting.

But neither one did.

"It's one thing to be vocal, it's a completely different thing to cast a vote against the chairman," Brusca said.

Perhaps the most vocal inflation hawks decided it wasn't appropriate to dissent at the first meeting of the year.

"You could lose your credibility and become a clank. Or, you can wait until you really have something to dissent over," Brusca said.

0:00/05:08The Fed's inflation hawk

On last year's voting roster, only one member -- Kansas City Fed President Thomas Hoenig -- dissented officially, and did so at all eight meetings of the year, speaking against the Fed's policy of keeping interest rates low for an "extended period."

A delicate balancing act

In moving ahead with quantitative easing, the Fed is attempting to meet both its job responsibilities: to keep prices stable and maximize employment.

While the object of the policy is to get more money into the economy and stimulate growth to create jobs, it comes at the risk of higher prices. But with inflation pressures remaining low, the Fed sees little danger in pursuing more monetary stimulus.

"Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low," the Fed said in its official statement.

Since the recession, the central bank has struggled, however, to significantly bring down the unemployment rate, which currently sits at 9.4%.

Some critics -- including some Fed members -- have recently warned that accommodative monetary policy could devalue the dollar and fuel inflation at a time when the economy is already improving.

The Federal Reserve's voting body is currently made up of eleven members: Chairman Ben Bernanke, five Fed governors, the president of the New York branch and four regional bank presidents who rotate each year.

One Fed governor position -- which would bring the voting total up to 12 -- remains unfilled.  

Fed’s hand strengthens on tame inflation dataFed official: Stop asset buying

Initial jobless claims climb higher

That was up 51,000 from the 403,000 claims filed the week before, and much worse than the 410,000 claims economists surveyed by Briefing.com had expected.

"This is definitely a setback," said T.C. Robillard, a senior research analyst who covers several large staffing firms for Signal Hill Capital.

Jobless claims often bounce around from week to week. They dipped below the 400,000 mark four weeks ago, but then began rising again soon after.

"Broadly speaking, we're taking two steps forward and then one step back," Robillard said. "In my view, that's still progress, but it's certainly slow."

Snowstorms in the Southeast and layoffs of temporary holiday workers could be distorting the January numbers more than usual, some economists say.

Still, the general theme remains the same, Robillard said -- the economy is improving, but at a much slower pace than hoped.

Since the weekly figures can be volatile, economists look at the four-week moving average to smooth out the week-to-week choppiness. That figure rose 15,750 to 428,750 from the previous week, showing a slightly worse job market.

Continuing claims -- which include people filing for the second week of benefits or more -- rose to 3,991,000 in the week ended Jan. 15, an increase of 94,000 from the week before. 

Layoffs are slowing but jobs growth still weakJobless claims surge to 457,000