Jobs report: Improving tone, but only just

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The U.S. employment report for August was announced yesterday, comprising the following key numbers (courtesy of Asha Bangalore of Northern Trust):

Civilian Unemployment Rate: 9.6% in August, virtually steady for three straight months. The unemployment rate was 5.0% in December 2007 when the recession commenced. Cycle high for recession is 10.1% in October 2009 and the cycle low for the expansion that ended in December 2007 is 4.4% in March 2007.

Payroll Employment: -54,000 in August, matching the July decline, net gain of 123,000 jobs after revisions of payroll estimates for June and July. Private sector payrolls rose 67,000 in August after an upwardly revised gain of 107,000 in July.  Revisions of private sector jobs in the June-July months added 66,000 jobs.

Private Sector Hourly Earnings: $22.66 in August vs. $22.60 in July, 1.7% yoy increase vs. 1.8% increase in July.

Bangalore concluded as follows: “Bernanke’s unequivocal reassurance on August 27, 2010 that the Fed stands ready to act decisively if deflationary pressures appear or if economic conditions remain soft remains at the front of the radar screen in financial markets.  Prior to Bernanke’s speech, incoming data pointed to noticeably weakening economic conditions, with the disappointing housing market reports raising the intensity of concern.  However, economic data published this week convey slightly less worrisome conditions to the extent the ISM manufacturing composite index moved up in August, the Pending Home Sales Index of July advanced, and today’s employment data show a trend of small but stable gains in private sector employment.

On a comparative basis, private sector payroll employment ranks better than the 1991 and 2001 so-called “jobless recoveries” but falls short of the vigorous gains seen in other economic recoveries. The chart below is an indexed chart where payroll employment at the trough of each recession is set equal to 100.  A reading of 102 implies a 2.0% increase in employment from the trough and 98 stands for a 2% reduction in employment.

“In the months ahead, the FOMC will be watching for signs of stronger performance to make a case for watching from the sidelines rather than taking action to prevent a double dip.”

Source: Asha Bangalore, Northern Trust – Daily Global Commentary, September 3, 2010.

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