Another Weak U.S. Labour Force Report
Another Weak U.S. Labour Force Report
Another weak labour force report in December with 524,000 jobs lost and bigger declines reported for October and November than in the preliminary reports. December’s decline was in line with the updated consensus forecast. Revisions to the data for October and November added another 154,000 jobs lost to the year’s total with November’s job cuts revised to 584,000 from 533,000 and October’s decline revised to 423,000 from 320,000. The household survey indicated that the unemployment rate jumped 0.4% to 7.2% in December to stand at its highest level since January 1993.
The weakness in employment was broad-based with only government employment rising by a paltry 7,000. Goods producers cut payrolls by 251,000 with service-providers taking another big hit to employment as 273,000 workers were taken off their payrolls. Manufacturers cut 149,000 positions, while the construction industry reduced employment by 101,000. On the services side, the biggest cuts were made to trade/transportation/utilities (-121,000), professional services (-113,000) and temporary services (-81,000). Retailers also made a healthy cut to payrolls trimming 67,000 positions which built on the 100,000 jobs cut in November.
The average workweek slipped to 33.3 hours and hours worked in the manufacturing sector fell 39.9 hours, down from 41.0 as recently as July. Overtime hours continued to slide and came in at 3.0 hours. The index of aggregate weekly hours, which reflects the combined effect of hours and employment, fell 1.1% in December building on November’s 0.6% dip. In the fourth quarter, this index contracted at an annualized 7.7% compared to the third quarter average.
The monthly pace of wage gains slowed to 0.3% in December and the year-over-year rate of the key wage measure in the report edged down to 3.7% from 3.8% in November.
U.S. consumers face a myriad of bad news with today’s jobs report putting the icing on the cake as the data confirmed that the pace of job losses accelerated sharply late in the year and the unemployment rate climbed to the highest level since early 1993. Last year marked the biggest job losses since 1945 with the bulk of the decline occurring in the fourth quarter. Faced with a deteriorating labour market, a crisis in financial markets and a housing market recession, U.S. consumers pulled back with spending falling at the fastest pace in 28 years in the third quarter and we anticipate that spending will have contracted by an equal magnitude in the final quarter of the year.
The sharp pullback by the consumer as well as weakening business investment and souring demand for U.S. exports likely resulted in the economy contracting at the fastest pace since 1982. RBC forecasts that real GDP fell at a 6.1% annualized pace in the fourth quarter.
Against this economic backdrop, the Fed reduced the policy rate to 0% to 0.25% and committed to maintaining these “exceptionally low levels of the federal funds rate for some time” to ensure that the weakness in the economy does not intensify in 2009. Our forecast assumes that the combination of extremely stimulative monetary policy and an anticipated large fiscal stimulus package by the incoming Obama administration will lend sufficient support to the economy to ease the pace of decline in GDP during the first half of 2009 and set the economy on a positive growth path in the second half.
RBC Financial Group
http://www.rbc.com
The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.
If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader.
Comments
No comments yet.
Sorry, the comment form is closed at this time.