Unemployment dropped from 9.8 to 9.4 percent in December, its lowest rate in 18 months. But a closer look at the numbers reveals this report to be average at best and disappointing at worst. Even with economic indicators turning up across the board, from consumer demand to business sentiment, private sector job creation last month came in below expectations, at 113,000. That's no higher than July or September 2010, and it ranks as decidedly
average in a year where the private sector netted 94,000 jobs a month.

We're still "turning a corner." But the corner is starting to feel like the edge of a very large circle.

Dan Indiviglio does a great job summing up the top line stats and graphs from this morning's report. I'd like to break down the jobs recovery by sector. Of the 113,000 jobs added in December, 75 percent came from two industries: Leisure & Hospitality and Health Care. The rest came mostly from manufacturing, retail, and temporary workers.

unemp 2010-12 sectors.png

There's nothing wrong with leisure, hospitality, or health care. Nothing at all! But these are the same industries that grew through the downturn (like health care workers) or in the early stages of the recovery (like cheap food prep workers). If you're looking for a real turnaround, you want to see major U.S. industries actually turn around. That's not happening, yet. Construction is still in a free fall. The information sector is flat. The financial industry continues to limp, while business services have been inconsistent.

jobs 2008 to 2010-11 cht1.png

The U.S. economy blew out its financial-real estate motor in 2007, and it needs a backup engine. Where is that engine going to come from? I don't know. But economists are waiting for something besides health care and leisure to lead the 2011 recovery, and this employment report doesn't get us much closer.