In October 2011, the US unemployment rate eased to 9.0%. This was slightly lower than market expectations, which was for the unemployment rate to remain unchanged at 9.1%. Encouragingly, the labour market participation rate remained unchanged at 64.2%, which is a welcome combination.
During the month, total non-farm payrolls rose by a slightly disappointing 80 000. The market was expecting a rise of 95 000. Once again, there was a significant upward revision to the previous two months data of +102 000 jobs (there has emerged a pattern of consistent upward revisions to the prior two months’ payroll data).
During 2010, the US economy created 940 000 jobs, or an average of 78 000 jobs per month. That is below the estimated 100 000 increase in the number of people entering the job market every month. In the first ten months of 2011, the job gains have averaged a slightly more respectable 125 000 a month.
More encouragingly, the private sector added a welcome 104 000 in October, after adding a revised 191 000 jobs in September. Furthermore, the private sector has added 1.529 million jobs this year so far and has gained employment in each of the past 20 months at an average of 138 000 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 well over 1.5 million jobs in ten months if it was in recession!
In the month of October 2011:
- Employment in professional and business services continued to trend up in October (+32 000) and has grown by 562 000 over the past 12 months. Within the industry, there have been modest job gains in recent months in temporary help services and in management and technical consulting services.
- Employment in leisure and hospitality edged up over the month (+22 000). Since a recent low point in January 2010, the industry has added 344 000 jobs.
- Health care employment continued to expand in October 2011 (+12 000), following a gain of 45 000 in September. Offices of physicians added 8 000 jobs in October. Over the past 12 months, health care has added 313 000 jobs.
- In October, mining employment continued to increase (+6 000); oil and gas extraction accounted for half of the increase. Since a recent low point in October 2009, mining employment has risen by 152 000.
- Manufacturing employment changed little in October 2011 (+5 000) and has remained flat for 3 months. In October, a job gain in transportation equipment (+10 000) was partly offset by small losses in other manufacturing industries.
- Within retail trade, employment increased in general merchandise stores (+10 000) and in motor vehicle and parts dealers (+6 000) in October. Retail trade has added 156 000 jobs over the past 12 months.
- Construction employment declined by 20 000 in October, largely offsetting an increase of 27 000 in September; both over-the-month changes largely occurred in non-residential construction. Employment in both residential and non- residential construction has shown little net change in 2011.
- Employment in other major private-sector industries, including wholesale trade, transportation and warehousing, information, and financial activities, changed little in October.
- Government employment continued to trend down over the month (-24 000), with most of the October decline in the non-educational component of state government. Employment in both state government and local government has been trending down since the second half of 2008. In total, the Government has cut 323 000 jobs in the past 12 months, which is a decline of 1.45%.
Overall, while this month’s labour market report is a little disappointing, the ongoing job gains in the private sector are extremely welcome. In addition, the regular upward revision to prior data implies that the October reading could be revised up next month.
Given the structural economic difficulties in the US (housing market overhang, loss of production activity to emerging markets, huge fiscal constraints), it appears likely that employment will take a number of years to fully recover from the great recession (employment is still down almost 7 million jobs, and a portion of that is likely to become structural in nature). This implies that the US will struggle to return to its desirable or even its historical rate of growth over the next few years.
In the short-term, however, while the US economy is experiencing only modest growth, the latest employment numbers suggest that the economy has managed to continue to avoid a return to recession conditions.
Lastly, while many analysts continue to refer to employment as a lagging economic indicator, it also provides an important guide to future economic activity in the sense that it helps us to better understand the prospects for future household spending, which is a vital component of the US economy.
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