The U.S. labor market is far from healthy, and the prospects are low for changing that diagnosis any time soon. But there’s a small ray of hope for thinking that the net loss of jobs is over and maybe, just maybe, some degree of expansion is near. Last week’s update on new hires is one of the positive smoking guns for expecting a better job market in the weeks and months ahead, if only marginally so.
It’s hard to overestimate how much influence the labor market will color the details of the economy in 2010. Suffice to say we’re at the point that the trend in jobs will have an outsized effect on what unfolds in the year ahead, for good or ill. A surprisingly strong recovery? A double-dip recession? Or something in between? We think the third choice is the right answer, although there’s a lot of play even there in terms of the details. In any case, much of the true answer will come via the labor market, now more than ever.