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Economic growth likely to be uneven in 2012

Diane Swonk Jan 5, 2012

Stacey Vanek Smith: A new report out from payroll firm Automatic Data Processing found the private sector added 325,000 jobs in December. And the Labor Department reports weekly jobless claims came low enough to indicate the unemployment rate might be falling.

Diane Swonk is chief economist at Mesirow Financial in Chicago. She joins us live. Good morning Diane.

Diane Swonk: Good morning.

Smith: So Diane, some very positive jobs news — what do you make of it?

Swonk: To some extent, the December numbers from ADP tend to overstate what we see from the government. But that said, very good news. Over 80 percent of the job gains of 325,000 came from the small business sector. And that’s really very encouraging going forward, and consistent with other job gain data — other anecdotal data — on the labor market that we’ve seen. Manufacturing is up, construction employment looks like it might be up a little bit from very low levels. And we did see some hiring during the holiday season.

Smith: Diane, why are small business hires so significant?

Swonk: The issue on small business hires — particularly by these payroll firms like ADP — is that newer small businesses tend to use payroll firms. They outsource those payrolls as they start up because it’s cheaper, it’s easier to do, and we can count them.

And new small businesses are the backbone of a continued recovery in the economy. It’s a bet on the future. We’re actually seeing small companies willing to make that bet on the future, which is something that’s been absent from the recovery so far.

Smith: Well Diane, we’ve gotten a lot of positive data this week — some good news out from manufacturing and car sales. I don’t want to jinx anything, but are we possibly seeing signs of an economic turnaround in 2012?

Swonk: We are going to see an economic acceleration in growth, although off of not much of anything in 2011. 2011 was a very weak year with a reacceleration at the end of the year. Some of it was recouping losses related to Japan, higher energy prices and things like that. Some of those things will go away.

Of course, we’ll continue to see manufacturing — particularly the auto sector — strong. But it’s going to be very uneven for the U.S. consumer as they deal with higher energy prices, and still very tight conditions in credit markets. The Fed has really pointed out how hard it is, still, to buy a home.

Smith: Diane Swonk with Mesirow Financial. Thank you Diane.

Swonk: Thank you.

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