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Today’s point of focus was the nonfarm payroll data released by the Labor Department. While some were anticipating a significant jump (a decrease in unemployment) the consensus was for a flat result. But the data was disappointing as nonfarm payroll fell by 85,000 in December. Obviously the economy is stilled grappling with deflationary forces.
This is alarming when you consider just how much stimulants the US government has pumped into the economy. More importantly, there was (positive) revision to the data for November 2009. Still, we are going through the worst recession in terms of job loss going back more than 60 years.
In a perverse way, the silver lining in the news is that the Fed and the US government are in no position to remove their monetary and fiscal actions. A rate hike at this point would just plunge us back into a darker abyss.
Delving a bit deeper into the data, let’s revise the chart for the duration of unemployment which tracks how long (weeks) people are out there looking for jobs:
Source: St. Louis Fed
Since the unemployment rate only tracks those that are actively searching and not those that give up searching for a job, this is an important statistic. We are continuing to push into record territory. As of December 2009 the average was 29.1 weeks or more than 7 months.
The widest measure of joblessness, the U6 unemployment rate, nudged up to 17.3%:
Source: Gluskin Sheff
The problem facing the US is that the longer this recession lasts, the total number of people in the population eligible for jobs and looking grows. That means more jobs have to be filled later than now to bring us back to normal. According to David Rosenberg:
We started the decade with a national payroll level of 130.8 million. We finished the decade practically unchanged at 130.9 million. Meanwhile, the total pool of available labour rose from 146 million to 159 million. In other words, we have the same number of jobs today as we did a decade ago, and yet we also have 13 million more people competing for them.
While everyone by now is familiar with the “lost decade” for the stock market, it has also been a lost decade for those looking for jobs. The average decade going back to the 1940’s has brought with it between 20% - 38% job growth. But in the past decade we basically had no gains, while the US population kept increasing:
Source: Chart of the Day
The US macro outlook remains extremely fragile. Unfortunately, the financial “rescue” was to maintain the status quo of the large financial firms (who are now even larger) and the bonuses of their executives, rather than the wider economy.
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