FORTUNE — On Thursday, we received more evidence that the economy is broken.
The government said GDP rose 3.2% in the last three months of 2013 — one of the fastest rates since the end of the recession, though slower than the third quarter’s 4.1%. Still, that sounds good, until you remember this: Employers only added 74,000 jobs in December — one of the worst months in nearly three years. Stronger economic growth is supposed to equal more jobs. So what gives?
It does appear that the normal relationship between jobs and GDP has broken down. In the first half of 2013, for instance, GDP growth was at 1.9% and employers added an average of 195,000 jobs a month. In the second half of the year, GDP picked up to 3.6%, but the rate of job growth slowed to 170,000.
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Over the past decade, on average, a one percentage point change in GDP has translated to about 115,000 more, or fewer, jobs. But the number jumps around a lot. And there are some things that do tend to disrupt the relationship.
Immediately after a recession, strong GDP growth doesn’t tend to produce the same level of job growth as usual. That’s because GDP at that moment is rebounding rather than growing. What’s more, employers are slow to hire after a recession. That’s what happened in 2010 and 2011. But we are now four years out of the most recent recession, so it’s odd that the relationship hasn’t returned to normal.
Hours and productivity can mess with the GDP-to-jobs equation. As hours and productivity go up, employers can make more money with the same number, or fewer, workers. But the average work week has not grown much recently and productivity, after growing rapidly in the 1990s and then right after the recession, has been flat-lining as well.
What’s going on?
Most of the economists I talked to shrugged it off. It’s mostly a short-term problem, they said. Most people think December’s jobs number represented a temporary slowdown, perhaps caused by the cold weather. Job growth will rebound in January, they say. If that happens, the GDP-to-jobs number will look more normal. For all of 2013, the ratio of jobs to GDP growth was 88,000. So we’re not that far off the 115,000 average when you look at the whole year, even if recently the number has been more like 50,000.
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But I don’t think you can completely write off this trend. Yes, December’s jobs number was perhaps worse than it should have been, and it may very well be revised up. But it will not be revised to a figure like 300,000, even after adjusting for the weather. The fact of the matter is the job market is still slow. And at least part of this has to do with the fact that the mechanism we have used to turn economic growth into jobs is not working as well as it used to.
The lack of lending by the big banks may very well be one contributing factor. Another theory: Companies have gotten greater rates of return investing in capital in the past decade or so than they have in putting the money into hiring more workers. That’s led companies to believe that the best use of their money is to plow it into technology or buying back their own stock. But, as recent productivity numbers show, the benefits from those investments are falling. Corporations don’t seem to have noticed that yet.
Whatever the reason, Thursday’s GDP numbers suggest that even if the overall economy is back, the labor market could still lag for a while.
