More often than not, there is usually a way of splicing the monthly US employment report to tell the story that fits your view. This month, the main one is the fact that the unemployment rate (based on the household survey) fell, despite the disappointing rise in non-farm payrolls. There is also the sub-text of the upward revision to November. So it's not that difficult to spin the "It was weak, but..." line. In the bigger picture though, the US labor market is only just at the beginning of a recovery that will take years, rather than months.

Compared to the normal path of job market recoveries after recessions, what we've seen so far is not that far from the norm. If we take the total non-farm payroll total, employment has growth 0.50% since the official start of the recovery. That sounds fairly paltry, but is better than the previous two recoveries, including the period after the 2001 recession (which became labeled the 'jobless recovery'), when employment had fallen nearly 1% at this stage.

Even taking into account the sharp fall in the unemployment rate seen in the December numbers, the picture is also comparatively promising vs. previous recessions, with the past two seeing the unemployment rate higher 16 months into the recovery. Currently, we are 0.3% lower vs. August 2009.

There are three issues that are particularly worrying going forward, all of which will have major consequences for how the economy behaves in 2011 and beyond. The first is the rise in long-term unemployment. This is notably worse than we have seen in other recoveries. The proportion of long-term unemployed as a percentage of total unemployed has risen from 33.6% to 44.3%. This is the biggest increase we've seen in this ratio during a recovery over the past 30 years (i.e. higher than for all three previous recoveries).

The second issue, which is partly a consequence of the first, is that a large proportion of workers are being forced to switch careers and mostly take a pay cut in the process. This was highlighted last month in a report from the Rutgers University ("The Shattered American Dream: Unemployed Workers Lose Ground, Hope and Faith in Their Futures"). It's not that surprising, as recessions destroy not only jobs (temporarily), but also industries (more permanently). There was strong evidence that this contributed to the joblessness of the last recovery (as described in a 2003 NY Fed paper "Has structural Change Contributed to a Jobless Recovery").

The third issue is the comparison of job creation so far compared to the peak of the employment cycle, seen in December 2007. In terms of getting back to peak levels of employment, we are only 12% along the road. Given the current pace of job creation, it will take seven years to get there. By this stage of the early '90s' recovery, employment had more than surpassed its pre-recession peak.

This picture may change. The pattern of recoveries is that hiring often takes off once confidence returns and the economy uses up the available slack in product and capital markets. This looks to be more the outside chance than central scenario this time around. For now, a subdued pace of job creation looks set to keep real wage growth low and prolong the return to what will feel like a recovery for the still heavily indebted US household sector.