Wednesday’s ADP number had the market very optimistic about today’s jobs data. Even normally even-keeled I was practically giddy. I went out on a limb for our informal contest on the desk and called for a gain of 165,000 jobs. Alas, it was not to be. The U.S. economy added 103,000 jobs. This is just a little over half the number of jobs believed necessary to keep up with the number of people entering the job market. Even the much-watched and very important Private Payrolls component disappointed adding 113,000 jobs. There was some good news in the report. November Non-farm Payrolls was revised higher to 71,000 from 39,000. November Private Payrolls was revised upward to 79,000 from 50,000.
The big story may be that the unemployment rate fell to 9.4% from 9.8%. The question immediately asked regarding the fall in the unemployment rate is: Has it fallen because significantly more Americans obtained employment or is it because many displaced workers became discouraged because they could not find meaningful employment? Remember, if a displaced worker answers the so-called household survey that they are not seeking employment at this time, they are not considered to be unemployed at the present time. Although a more complete parsing of the numbers is needed to determine the exact cause of the sharp drop of the unemployment rate, word on the Street is that discouraged workers (measured as workers leaving the workforce) increased last month. Also possibly affecting the unemployment rates is the expansion of unemployment benefits as part of the latest economic stimulus package (which includes the extension of the Bush tax cuts). It is possible that some displaced workers who were actively seeking employment now see the situation as being less urgent as the will continue to receive benefits for a while longer. The slow recovery continues. Here is what some market participants had to say:
“Firms must ratchet up hiring before we can expect
consistent trend growth for the economy. Slower job growth will weigh on
consumer spending for the next few quarters.”
“While it appears that the economic environment has
stabilized and is perhaps improving, persistent high
unemployment and uncertainty in the economy could continue to
pressure consumers and affect their spending,”
Where were the jobs created? The service sector added 105,000jobs. Retailers added 12,000 employees in December. The construction sector eliminated 16,000 jobs and state and local governments cut 20,000 jobs. This was tempered by the addition of 10,000 Federal Government jobs. The economy also added 16,000 temporary jobs. There was also a pickup hiring in the auto sector. Ford announced that it is planning to hire 1,800 new workers. This is significant. As per the new labor agreements, new workers at the “Detroit Three” automakers receive a much less attractive compensation package than legacy employees. This is something the UAW is looking to change.
Average Weekly Hours remained unchanged at 34.3. Average Hourly Earnings rose 1.8%, in line with the street consensus. Today’s numbers were not horrible, but they were disappointing, especially for those who believed that the U.S economy had turned a corner and was ready to gain speed. We are not there yet. However, we are not poised on the precipice of a double-dip recession either. Slow and steady with modestly-higher long-term rates and an accommodative Fed for at least 2011 (if not longer) appear to be in the cards, at least for now.
Fed Chairman Ben Bernanke stated this morning that he sees the economy improving in 2011, but not fast enough to appreciably lower unemployment. He believes that it could be four or five years before unemployment returns to "normal."
The real unemployment rate remains stubbornly high (just under 17%). Here is a link to the Bureau of Labor Statistics real unemployment data (U-6):
http://www.bls.gov/news.release/empsit.t15.htm
Play defense, invest wisely and have a great weekend.
No comments:
Post a Comment