In January 2012, the US unemployment rate fell to a surprise 8.3%, from 8.5% in December. This was lower than market expectations, which was for the unemployment rate to remain unchanged at 8.5%. The labour market participation rate fell further to 63.7% in January 2012 down from 64.0% in December 2011. This remains one of the key concerns about the US labour market (see our latest US employment monitor).
During the month, total non-farm payrolls rose by an impressive 243 000. The market was expecting a rise of 140 000. There was a significant upward revision to the historical data, which is part of the annual revision process. The data was adjusted back to the beginning of 2002, and adjusted up by a total of 266 000 (previous two months revised up by 60 000 jobs).
During 2010, the US economy created 1 027 000 jobs, or an average of 86 000 jobs per month. That is below the estimated 100 000 increase in the number of people entering the job market every month. However, in 2011, the job gains averaged a far more respectable 152 000 a month, while the job gains over the past five months have averaged 183 000.
The private sector added a welcome 257 000 in January 2012, after adding a revised 203 000 jobs in December 2011. Furthermore, the private sector has added 2.229 million jobs in the past year and has gained employment in each of the past 23 months at an average of 159 000 jobs a month. While this is not spectacular or even remarkable, it is certainly not indicative of a return to recession conditions. In others worlds, the US economy would, typically, not add over 2.2 million jobs in twelve months if it was in recession or about to experience a recession.
The government continued to shed jobs, with total employment declining by a further 14 000 in January 2012. Over the past year, the government has shed a total of 276 000 jobs.
Overall, this month’s labour market report is extremely encouraging. The job gains were extremely broad-based, including 50 000 new jobs in manufacturing and 21 000 new jobs in construction. On the downside, the information industry lost 13 000 jobs (mostly the movie industry down 7 000) while the broad financial services sector shed 5 000. As expected, the government continues to shed jobs, and in January 2012 government employment fell by a further 14 000.
Given the structural economic difficulties in the US (housing market overhang, loss of production activity to emerging markets, huge fiscal constraints, etc), it appears likely that employment will still take a number of years to fully recover from the great recession. Employment is still down 5.6 million jobs since before the great recession and a portion of those job losses are likely to become structural in nature. This implies that the US will continue to struggle to return to its desirable or even its historical rate of growth over the next few years. However, the latest trend in employment suggests that the US economy can continue to recover at a moderate pace.
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