Jobs report: QE3 – a matter of when?
This post is a guest contribution by Dian Chu, market analyst, trader and author of the Economic Forecasts and Opinions blog.
The latest U.S. Labor Department data indicated that non-farm payroll added 103,000 jobs in December, which is far short of expectation, but the unemployment rate somehow managed to fall sharply to 9.4% (from 9.8% in November) far exceeding expectation.
103k Jobs Not Enough To Drop Unemployment Rate
Since the nation added only 1.1 million jobs in total last year, or averaging 94,000 jobs a month, the 103,000 new jobs added, coupled with a 0.4% drop in unemployment rate in December, simply does not make much sense.
Furthermore, not only the number of discouraged workers over job prospects hit a record high (since 1994, the earliest year the data is available) of just over 1.3 million (Fig. 1)–more than the number of jobs added in 2010–but the labor participation rate also plunged to a 25-year low of 64.3% ….post-recession! (Fig. 2).
Most Disturbing – Long Term Unemployed
The All Inclusive Jobless Rate Could Be 11%+
Needed – 300k Jobs Per Month
Most economists estimate that that in order to make a meaningful dent in the jobless situation while keeping up with the labor force growth rate, new job creation needs to be at around 300,000 a month going forward, which is a long way from where the economy is right now (Fig. 3).
Worse Before Better
Housing & Auto – Key To Jobs
QE3 – A Matter of When
That, of course, will evolve into a total beast by itself later on. But we could always remain hopeful that the U.S. labor market and economy would be strong enough to tackle that equally, if not more, daunting challenge.
Source: Dian Chu, Economic Forecasts and Opinions, January 8, 2011 .
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