David Prosser: Where will all the jobs come from?

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The Independent Online

Outlook Whisper it, but the US's famous "jobless recovery" may finally be beginning to generate some jobs. Yesterday's ADP employment report suggested that the private sector in the US took on 297,000 new employees in December, three times as many as economists had forecast.

Before we get too excited, it's worth noting that another report yesterday warned the US services sector lost jobs last month, and that the ADP figures tell you nothing about the public sector, where government jobs are still being shed. Moreover, the November ADP jobs figure also surprised on the upside, only for the non-farm payroll data, the key measure of US employment, to disappoint.

Still, the trend on employment now appears to be upwards, which will come as a huge relief to President Obama's Administration, which until now appears to have pulled off a neat trick of turning the economy around without getting people back to work.

Is there a read-across to the UK, where unemployment has begun rising again, even though oureconomic recovery last year was stronger than expected? Unfortunately, there are no guarantees. The broad consensus now is that our austerity measures will not prompt a double-dip recession, but that they will act as a brake on growth during the course of 2011.

Even if the strong performance we have seen from manufacturing in recent months continues, the sector is not producing many new jobs – that has also been a feature of the manufacturing recovery in Germany – and certainly not enough to compensate for the job losses in the public sector.

The latest data from the construction sector, meanwhile,suggests its recovery is already beginning to stall. That leaves the dominant services sector, which includes all those consumer-facing businesses in the firing line of the austerity package, as well as many companies that depend on contracts from the public sector. The outlook is hardly rosy.