Issue of the week: Will business start hiring again?

“The job market is healing,” said Christopher Rugaber in the Associated Press. That’s the takeaway from the Labor Department’s New Year’s Eve announcement of an unexpected drop in first-time unemployment insurance claims in the last week of December. First-time claims fell by 22,000 to 432,000, defying economists’ forecasts of a slight uptick. The steady drop in first-time claims since last autumn raises “hopes that the economy may soon begin creating jobs,” giving households more money to spend and reinforcing the pickup in business activity. There are other promising signs, said Neil Irwin in The Washington Post. The latest survey from the Institute for Supply Management, which tracks manufacturing activity, shows manufacturing accelerating at the fastest rate in three years. “Manufacturers are cranking up production to rebuild business inventories that firms let shrink” during the recession, and they’ll probably resume hiring as they add shifts.

Don’t read too much into those reports, said Luca Di Leo and Sarah Lynch in The Wall Street Journal. “The trend in jobless claims is sometimes hard to read during the holidays,” because the downtime can delay some states’ reporting of new applications for benefits. More important, employers themselves aren’t expecting a turnaround anytime soon, said Alan Wolf in the Charlotte, N.C., News & Observer. A survey of 1,431 corporate chief financial officers found that most “expect business conditions to improve in 2010, but that hiring will be flat or down.” Taken together, those data points suggest that “the slow recovery won’t bring much relief for job seekers.”

The grim outlook compounds the frustration felt by job seekers like Jeff Boose of Hillsborough, N.J., said Paul Davidson in USA Today. Boose, who once pulled down $400,000 a year as chief financial officer of a New York City advertising agency, has been looking for work since he was laid off in the summer of 2008. He’s “dumbfounded by his inability to land a position despite a résumé brimming with accomplishment.” Like many other unemployed Americans, he’s the victim of what’s known as a “structural shift” in the economy—meaning that some economic sectors, such as advertising and car manufacturing, may have undergone permanent shrinkage. Even if the economy recovers fully, those sectors will require fewer workers than they did before the recession.

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The scarcity of jobs and the frantic scramble for the few positions that are open have scarred the American psyche, said Robert Samuelson in The Washington Post. We appear to be entering “an era of economic frustration, characterized by slower growth and contentious competition for scarce resources.” A new sense of caution—even fear—is pervasive among young people, who usually tend to be more optimistic about the economy than their elders. If the young lose faith in the future, they won’t take the risks necessary to start new businesses, which are the primary generators of new jobs. That’s why Washington needs to encourage start-ups and job creation. Nothing less than America’s “economic resilience” is at stake.