Saturday, January 8, 2011

US payroll data doesn't live up to the hype

US December employment data failed to live up the pre-release expectations. Many foecasters had revised up their forecasts for this result on the back of stronger data on unemployment claims and other surveys of employment. Non-farm payrolls rose 103k, below the median market expectation of +150. Private payrolls were up 113k in the month, including +10k in the manufacturing sector. Remember manufcaturing is a key sector to watch given where we thing growth momentum needs to come from.
Offsetting the headline disappointment was upward revisions to previous data with the October gain of 172k revised up to +210k and November from +39k to +71k.

The unemployment rate dropped from 9.8% to 9.4%. On the surface that's a pretty good result, but it was largely the result of a drop in the participation rate. That most likely reflects disenfranchised job-seekers giving up the search for work and therefore dropping out of the labour force, so this should not be read as an indicator of any strengthening of momentum in the labour market.

The picture therefore remains one of subdued labour market activity reflecting the subdued pace of economic growth in the US.