OPTIMISM ABOUT U.S. ECONOMY DIMMED BY 2011 JOB PROSPECT

By Matthew Rusling

WASHINGTON, Jan. 5, -  There is good news and bad news for the U.S. economy this year.

The good news is that the stock market and corporate profits are expected to fare well, the economy is forecast to grow, and hiring is expected to pick up.

The bad news, however, is that the economy will not add enough jobs to significantly reduce the unemployment rate, which currently stands at 9.8 percent.

"2011 is going to be a bad year," said Heidi Shierholz, an economist with the Economic Policy Institute, speaking about employment prospects for Americans.

"What we will have in 2011 is a continuation of this very rocky, slow recovery," she said. "We will be adding jobs but not enough to put the 15 million unemployed workers we have back to work."

That means families will continue to suffer. Workers who have avoided layoffs are seeing continued cuts in hours, which can make a significant difference for those living paycheck to paycheck. Even a cut from, say, 42 to 36 hours per week could mean the difference between being able to pay the rent or not, she said.

WIDENING GAP BETWEEN TWO ECONOMIES

Writing as a guest blogger for the Christian Science Monitor, Robert Reich from the University of California at Berkeley said that this year "the two American economies -- the Big Money economy and the Average Working Family economy -- will continue to diverge."

"Corporate profits will continue to rise, as will the stock market. But typical wages will go nowhere, joblessness will remain high, the ranks of the long-term unemployed will continue to rise, the housing recovery will remain stalled, and consumer confidence will sag," said the former labor secretary.

He expects the jobless rate to remain at around 9 percent in 2011.

OPTIMISTS SEE LIGHT AT END OF TUNNEL

Still, there are reasons for optimism.

The stock market on Monday surged, closing at highs not seen for more than a year, on hopes of a stronger, more robust economy.

Analysts noted that manufacturing has improved, and some have expressed optimism that the White House and Congress seem poised to cooperate after two years of bitter rivalry.

In terms of the economy as a whole, the U.S. Federal Reserve said Tuesday that it expected the economy to pick up momentum in the near term, and in recent months the Federal Open Market Committee forecast between 3 percent and 3.6 percent growth for 2011.

As growth picks up, employment is likely to follow suit, and the economy could add 200,000 to 300,000 jobs per month by mid-year, said Robert Johnson, associate director of economic analysis at Morningstar, an independent research provider. That could add up to between 2.4 million and 3.6 million jobs by year's end.

While that figure is only a small portion of the jobs needed to get back to pre-recession levels of unemployment, it is still welcome news, he said.

Also encouraging is that this year's expected growth is likely to lead to more hiring, Johnson said.

When GDP grows at just under 2 percent, employers can always squeeze a little more productivity out of their workers. But when GDP grows between 3 and 4 percent, it is time to start hiring, Johnson said.

"I think given the better growth that we're seeing, it's going to start to creep into employment, then you get this virtuous cycle, which means more people spending, more people buying things, more things needed. It means the factories have to hire more people," he said.

WAGES, OIL AND INFLATION

Some economists argued that wages will remain flat this year. Others predicted a wage increase of around 2.5 percent to 3 percent, although it is difficult to track low wages or part-time workers.

The real question, however, is whether inflation and rising commodity costs such as oil and gasoline will eat up those extra earnings, Johnson said.

Indeed, investment banks such as Goldman Sachs predict that oil futures will reach 100 U.S. dollars per barrel next year. Economists contend that once prices pass that benchmark, this could spell trouble for the economy.

The price of gasoline in the United States, which has risen 17 percent from a year ago, also has economists fret over the impact.

That means that people could end up spending more money on driving, which could cut into their ability to purchase other goods.

That in turn could hurt the economy at a time when it is just starting to gain strength, some economists noted.

ZANIS