WASHINGTON – Employers are laying off fewer workers, a trend that normally suggests hiring is picking up.
The January jobs report next week will show whether employers have begun to hire more freely or are still waiting for the economy to strengthen.
The number of people seeking unemployment aid has reached a five-year low. Some employers, such as health care companies, restaurants and retailers, are hiring steadily. Yet overall job growth remains modest.
And the unemployment rate is the same painful 7.8 percent it was when Barack Obama became president four years ago.
The economy isn’t growing fast enough to accelerate hiring. Flat pay and high unemployment are holding back consumer spending, which rose at a meager annual rate of 1.6 percent in the July-September quarter.
The economy expanded at a 3.1 percent annual pace in the same period, partly because companies stockpiled more goods, which boosts production. Most economists think growth dipped below a 2 percent rate in the October-December quarter because consumer demand remains tepid.
Another factor has been uncertainty about federal spending and budget deficits. Most companies don’t seem worried enough to cut jobs. But many may not boost hiring until further progress on the budget is achieved.
This month, Congress avoided the fiscal cliff in part by postponing automatic spending cuts. And this week a deadline for raising the government’s borrowing cap was put off for three months.
Significant hiring gains are unlikely ... when there remains so much political uncertainty, said Paul Dales, an economist at Capital Economics.
First-time applications for unemployment benefits dropped 5,000 last week to a seasonally adjusted 330,000, the government said Thursday. That’s the fewest since January 2008. The four-week average, a less volatile measure, also fell to nearly a five-year low.
Applications are a proxy for layoffs. They fluctuated between 360,000 and 390,000 for most of last year. At the same time, employers have added an average of 153,000 jobs a month.
Some sectors are already picking up. Manufacturers added the most jobs in nine months in December. Retailers posted three months of big gains last fall. Restaurants and hotels have been hiring at a healthy pace since the summer.
Health care companies added nearly 30,000 jobs a month last year – almost one-fifth the overall total.
Construction companies may step up hiring soon. Homebuilders started work in 2012 on the most new homes in four years. State and local governments, though, are still shedding jobs. And job gains in the financial services and transportation and warehousing industries have been weak for months.