Alison
By Allison Linn Senior writer
msnbc.com
updated 1/7/2011 11:57:43 AM ET 2011-01-07T16:57:43

It took just 18 months for the nation’s unemployment rate to rise from 5 percent to over 10 percent during the economic downturn. It is likely to take many years before the jobless rate drops back anywhere near 5 percent, economists say.

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The unemployment rate fell in December to 9.4 percent from 9.8 percent in November, the Labor Department said Friday. It was the lowest in 19 months as the economy generated a net total of 103,000 jobs and marked the biggest one-month decline in the jobless rate since April 1998.

Story: U.S. businesses stepped up hiring in December

The economy is moving in the right direction, analysts say, having added 1.1 million jobs, or an average of 94,000 jobs a month in 2010. But it is not enough to have a significant impact on the unemployment rate, which remains uncomfortably close to the 27-year high of 10.1 percent hit in October 2009.

“It’s going to take a whale of a long time to get back to any semblance of normal, even if the numbers are going up,” said Mike Montgomery, U.S. economist with IHS Global Insight.

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Like most economists, Montgomery does not expect the unemployment rate to drop below 9 percent this year, even as the economy steadily adds jobs at a modest rate amounting to a net 100,000 to 200,000 positions monthly. By the end of 2012, he expects the jobless rate to remain at a historically high level of 8.5 percent.

Part of the problem is that the growing U.S. population means the economy needs 100,000 new jobs each month just to absorb new workers and prevent the unemployment rate from rising, said Paul Ashworth, chief U.S. economist with Capital Economics.

As the economy improves more people will come off the sidelines to look for work too, either because they have been in school getting retrained or simply because they see job prospects improving. The government measures the unemployment rate by a survey method in which people are considered unemployed only if they are actively seeking work.

In December, the Bureau of Labor Statistics said the number of people in the labor force actually fell by around 260,000, which is one reason the unemployment rate declined so sharply.

A broader glimpse at the unemployment rate

Goldman Sachs projects that employers will add 2.2 million jobs this year, or about 180,000 a month, double last year's amount. Moody's Analytics puts the figure at about 250,000 per month.

Economist Joel Naroff noted in a research note Friday morning that we have come a long way from last year, when the economy was still shedding jobs. But he said Friday's unemployment report shows improvements in the jobs picture will be slow.

"The details of the report support the view that businesses continue to hire but still see no reason to add lots of workers," Naroff wrote.

Federal Reserve Chairman Ben Bernanke, who spoke about the economic outlook Friday on Capitol Hill, said it will take years for the unemployment rate to return to a healthy level of about 5.5 percent.

"The economic recovery that began a year and a half ago is continuing, although, to date, at a pace that has been insufficient to reduce the rate of unemployment significantly," Bernanke said in testimony released Friday morning.

The Fed said the testimony was written before the unemployment rate was announced.

Readers, are you back at work after a long job hunt?

Where the jobs are, and aren’t
For millions of jobless Americans, the big question is where the jobs are.

Experts expect continued job growth in health care, which has been a bright spot even during the sluggish recovery.

Montgomery also is expecting to continue to see strength in temporary jobs. But while such jobs have traditionally been seen as an indicator that employers were gearing up to hire more full-time workers, it’s not clear that will be as true this time around.

Instead, he said, some of those jobs may be designed to employ temporary workers for longer, so the employer doesn’t have to take on the burden of benefits and other costs of full-time employees.

Ashworth is expecting to continue to see jobs growth in manufacturing, as the weak dollar and economic growth in Asia and parts of Europe spur demand for experts.

It’s not likely to be enough to offset the approximately two million manufacturing jobs that have been lost since the recession began.

The job market will remain tough in industries including construction, Ashworth said. That sector has been decimated by the housing bust and a slowdown in commercial building.

Employment gains in December were led by the private services sector, which saw payrolls rising 115,000 after gaining 84,000 in November. Retail jobs increased 12,000 after a surprise 19,400 slump in November when retailers reported their best sales in years.

Temporary hiring increased 15,900 after 31,100 in November.

The goods-producing sector shed 2,000 jobs in December after losing 5,000 in November, but manufacturing payrolls rose 10,000. Construction employment fell 16,000 after slipping 2,000 in November.

Montgomery also is expecting the government to continue to shed jobs in the coming year, as cash-strapped states and budget-minded federal officials look for more ways to pinch pennies.

That's one of the reasons President Obama is courting business so heavily lately. It's estimated that non-financial companies have almost $2 trillion in their coffers and the president would like companies to use some of that to hire workers in the U.S.

With the unemployment rate still extremely high by historical standards, experts say jobseekers shouldn’t limit themselves to any one field. After all, even in a sector that isn’t adding many jobs, there are bound to be people who leave and jobs that come open.

“Look everywhere,” Montgomery said. “It’s not like you can target an industry and say, ‘I want to work for the high-tech companies,’ as much as you could have five years ago.”

Take a break and follow me on Twitter @alinnmsnbc

The Associated Press and Reuters contributed to this report.

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