2012 Job Gains: This Time, It's Different

It's starting off much like 2011, but the 2012 job market is looking much stronger.

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The jobs outlook is improving, according to the latest quarterly outlook survey from the National Association of Business Economics. After predicting in November that 2012 would see an average 8.9 percent jobless rate, economists in the latest survey now foresee an 8.3 percent jobless rate for the year. The picture is even better for 2013, at 7.8 percent.

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Even casual observers might point out that the 2012 jobs numbers could look an awful lot like 2011. Last year also started off with strong growth, including three straight monthly gains of well over 200,000 jobs, followed by a nosedive in job growth over the summer. Yet economists have plenty of reason to be more optimistic this time around.

"The moving average [of payroll growth] has been increasing. We have been gaining a higher number of jobs over a long period of time," says Gregory Daco, a principal U.S. economist at IHS Global Insight. Viewed over a longer time horizon, the U.S. economy appears to have more steady momentum now than in late 2010 and early 2011, when the nation was shaking off of a summer in which jobs were being shed.

In addition, other fundamentals look much better this time around. Housing starts have improved over early 2011. January's annualized 699,000 housing starts was an improvement of nearly 10 percent over January 2011, and was also higher than the rate in 11 out of 12 months of 2011.

Economic growth has also accelerated. In the first quarter of last year, the economy was barely moving, at an 0.4 percent annual growth rate, but it sped up to 2.8 percent in the fourth quarter. NABE economists predict 2012 GDP growth to be a modest 2.4 percent. That's far better than the 1.7 percent growth that the nation saw for all of 2011.

Still, there is always a sense of economic uncertainty, whether recession or boomtime. In 2011, unforeseen events like the Arab Spring, Japan's massive earthquake, and the U.S. debt ceiling debacle all contributed to economic turmoil, says Daco. This year has its own looming threats—tensions with Iran that threaten the closing of the Strait of Hormuz, a key oil-shipping route, as well as tightening fiscal policy and the European debt crisis are all potential barriers to growth. But as the economy strengthens, those problems could be less and less likely to derail any recovery.

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"There are still risks on the horizon, but the situation as it stands is not the same as it was over the course of 2011," says Daco.

One other key forecast remains subdued—that from the Federal Reserve Board. The central bank famously announced in January that economic conditions could warrant "exceptionally low" interest rates for two-and-a-half more years. Low interest rates are intended to stimulate the economy by encouraging borrowing. The interest rate has already been sitting near zero for over three years.

However, climbing gas prices could push inflation upward, both potentially improving the case for raising interest rates and hitting consumers in their pocketbooks...which might push economists toward gloomier outlooks once again.

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