Yes, the U.S. is hiring but at a snail’s pace

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Nonfarm payroll employment (jobs) yesterday increased far less than expected, with a net gain of only 103,000 jobs. The household survey produced a more positive assessment of the labor market, with the unemployment rate declining by 0.4 percentage points to 9.4%. Although household employment increased by about 350,000, labor force participation fell as well.

For some perspective, a graph from Chart of the Day illustrates the percentage increase in the number of jobs for every decade since the 1940s (the data goes back to 1939). “Up until this millennium, the number of jobs at the end of a decade has always been at least 20% greater than 10 years prior. During the last decade, not only was that 20% plus growth not achieved, the decade actually ended with fewer jobs than when it began, said the report.

“This negative job growth is particularly noteworthy due to the fact that the U.S. population had increased by 10% in addition to a significant increase in global wealth during the same time frame. With one year down in the current decade (gray column), the chart illustrates that job growth is positive albeit only slightly so. If job growth during the current decade were to increase at the same pace as what occurred during the first year of this decade, the decade would end with an 8.7% gain in jobs (gray dot). This is certainly better than the past decade, but it is well off the 20% plus pace of prior decades.”

Source: Chart of the Day, January 7, 2010.

In a variation of the theme, Asha Bangalore of Northern Trust provided an index chart constructed to assess the relative performance of payrolls in each business cycle by setting the level of payroll employment at the trough=100. (Only the first eight quarters of the recovery are shown in the chart to keep it reader friendly. A reading of 103 implies that employment is 3.0% higher compared with the level at the trough.)

Source: Northern Trust – Daily Global Commentary, January 7, 2011.

Bangalore (Northern Trust) summarized the implications of the employment situation as follows: “The slow pace of payroll employment reinforces the view that the Fed will carry out its entire plan of $600 billion of purchases of longer term Treasury securities through June 2011, referred to as the second round of quantitative easing (QE2). Chairman Bernanke’s depiction of the labor market in this morning’s testimony at the Senate Budget Committee makes a case for the Fed’s accommodative stance of monetary policy.

“‘Although recent indicators of spending and production have generally been encouraging, conditions in the labor market have improved only modestly at best. After the loss of nearly 8-1/2 million jobs in 2008 and 2009, private payrolls expanded at an average of only about 100,000 per month in 2010–a pace barely enough to accommodate the normal increase in the labor force and, therefore, insufficient to materially reduce the unemployment rate.  On a more positive note, a number of indicators of job openings and hiring plans have looked stronger in recent months, and initial claims for unemployment insurance declined through November and December. Notwithstanding these hopeful signs, with output growth likely to be moderate in the next few quarters and employers reportedly still reluctant to add to payrolls, considerable time likely will be required before the unemployment rate has returned to a more normal level.’”

Click the video below for Bernanke’s opening remarks on the deficit to the Senate Budget Committee.

Source: CNBC, January 7, 2011.

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