By MICHAEL POWELL and SEWELL CHAN
January 8, 2011

The year 2010 ended on a disappointing note, as the economy added just 103,000 jobs in December, suggesting that economic deliverance will not arrive with a great pop in employment.

Signs still point to a long slog of a recovery, with the unemployment rate likely to remain above 8 percent — it sits at 9.4 percent after Friday’s report — at least through the rest of the president’s four-year term.

President Obama is not unaware of the political dangers posed by high unemployment. On Friday he appointed a new head of his National Economic Council, Gene Sperling, to replace the departing Lawrence H. Summers.

The latest report was also a let-down for some within the White House, as recent economic data had suggested that the recovery would gain speed going into 2011. The political stakes are high, as Democrats and Republicans wrestle over who should take credit for the progress of the jobs market, or the blame for its failure to ignite.

“We need collective patience,” said William C. Dunkelberg, chief economist for the National Federation of Independent Business. “You can’t recover quickly from a disaster like we’ve been through.”
With local governments continuing to shed some jobs, all of December’s gain came from private employers. In fact, private employment grew each month last year. The unemployment rate, which is based on a separate survey of households, fell from 9.8 percent in November, though a substantial part of that drop is caused by Americans leaving the work force.

Long-term unemployment, however, remains a malady without an easy cure. The percentage of the unemployed who have been without work 27 weeks or longer edged up last month to 44.3 percent, virtually unchanged from a year ago. Other indicators, such as the length of the workweek, remained stagnant.
The challenge, still unsolved, is how to add enough accelerant to light an employment fire. The Federal Reserve chairman, Ben S. Bernanke, said Friday that he expected economic growth to be “moderately stronger” this year.

“We have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold,” Mr. Bernanke told the Senate Budget Committee in his first testimony to the new Congress.
He was less optimistic about employment, noting that the job market had “improved only modestly at best.” And he added a cautionary forecast: “It could take four to five more years for the job market to normalize fully.”

Mr. Bernanke noted that housing, an enormous potential driver of middle- and working-class jobs, continued to edge downward. The Fed, he emphasized, plans to proceed with its plans to buy $600 billion worth of government bonds, in hopes of stirring more growth.

President Obama, in a speech at a factory in Landover, Md., accentuated the positive, which was a year of private sector job growth. “That’s the first time that’s been true since 2006,” he said. “The economy added 1.3 million jobs last year.”

Left unsaid, however, was the fact that job growth was not enough to absorb people entering the work force in the United States, much less to shrink the unemployment rolls.
R. Glenn Hubbard, dean of Columbia University’s business school and former chairman of the council of economic advisers for President Bush, remains a guarded optimist. He sees signs of the economy gaining speed.

“We could run as high as 200,000 per month this year, but keep in mind that might only bring the unemployment rate down to 9 percent,” Mr. Hubbard said. “That does very little for the person who is long-term unemployed.”

The so-called real unemployment rate, which includes those workers who are discouraged or have given up looking for work, stands at 16.7 percent.

Daniel Alpert, managing partner at Westwood Capital, pointed to a disturbing fact in Friday’s report. “We are seeing what appears to be evidence of structural unemployment,” he said, “among those in the prime, higher-earning 35- to 44-year-old demographic, where unemployment actually increased in December.”
The president’s advisers dispute this. Austan Goolsbee, the chairman of the council of economic advisers, agrees that long-term employment poses a great challenge, but he says there are few signs of European-style structural unemployment, in which job seekers essentially surrender hope.

“We are not cutting them off and dumping them out the door,” he says. “The biggest help for them is to drive down the overall employment rate.”

In the days leading up to the Friday report, economists pointed to hopeful signs. Consumer spending was on the rise, businesses were spending more, car sales nosed upward. And private surveys pointed to the possibility of a sharp, even explosive increase in hiring by small and midsize businesses.
Mr. Dunkelberg, however, noted that surveys of his membership showed no strong trend toward such hiring. Fifty percent reported they had no need to seek bank loans, as they had little intention of hiring.
“The consumer still has way too much debt and our members are very cautious,” he said. “Their only capital spending going on is to fix a leaking roof.”

Employment growth decelerated a bit toward the end of the year, with the biggest increases coming in October — the Bureau of Labor Statistics revised that number upward by 38,000 jobs on Friday.
Adam Hersh, an economist with the liberal-leaning Center for American Progress, recently ran a calculation to see when, at the current pace, the nation would regain the number of jobs lost during the great recession. The answer was 2037.

“Look, we have a huge employment crisis,” Mr. Hersh said.

Much of the growth last month came in the hospitality sector, which added 47,000 jobs. Such jobs, however, tend to provide lower wages and uncertain prospects for long-term employment.

Manufacturing, a source of encouragement earlier this year, added 10,000 jobs. And health services added 36,000, continuing a year-long rise in that area, fed in part by the aging of the American population.
Local governments shed 10,000 workers, fewer than in some past months, and state employment held more or less steady.

For the longer term, economists see hopeful signs. Some take the view that, in retrospect, the recovery of early last year was a false spring, reflecting only the bounce-back from the deep gloom of 2009. Real signs of recovery, including a pickup in shipping and manufacturing, took hold this autumn, they say.

“It’s pretty clear the economy went into a swoon last summer,” said Steve Blitz, senior economist for ITG Investment Research. “Now the real recovery is beginning, and I expect to see improvement.”

But, he acknowledged, he could as easily point to a glass still half empty. American corporations, sitting atop nearly $2 trillion of cash, are not doing much hiring, even as the president and Congress add the carrots of tax cuts and investment incentives.

“The most disturbing fact is that you’re not seeing any breadth in the hiring,” Mr. Blitz said. “It’s looking to be a slow climb.”■