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Employment Situation  
Released On 1/9/2009 8:30:00 AM For Dec, 2008
PriorConsensusConsensus RangeActual
Nonfarm Payrolls - M/M change-533,000 -500,000 -750,000  to -300,000 -524,000 
Unemployment Rate - Level6.7 %7.0 %6.8 % to 7.1 %7.2 %
Average Hourly Earnings - M/M change0.4 %0.2 %0.0 % to 0.3 %0.3 %
Av Workweek - All Employees33.5 hrs33.5 hrs33.2 hrs to 33.5 hrs33.3 hrs

The December employment report was dismal much as markets had expected. But October and November declines were revised down sharply. Nonfarm payroll employment in December plunged 524,000, following a drop of 584,000 in November and a fall of 423,000 in October. Payroll jobs have contracted every month in 2008 for a cumulative loss of 2.6 million this past year-the largest yearly drop since the end of World War II. The December nose dive in nonfarm employment was a little worse than the published market forecast for a 500,000 decrease. But actual expectations were lowered after Wednesday's very negative ADP report. The November and October figures were revised down a net 154,000.

Employment cuts in December were felt across the board. The latest decline was led by the service-providing sector which lost 273,000 jobs. The largest job losses were seen in trade & transportation, down 121,000, and in professional & business services, down 113,000.

Goods-producing industries had 251,000 fewer jobs in December. Manufacturing and construction declined by 149,000 and 101,000, respectively. Natural resources & mining slipped 1,000.

On a year-on-year basis, nonfarm payroll employment growth fell to down 1.9 percent in December from down 1.5 percent the month before.

Average weekly hours fell to 33.3 hours from 33.5 hours in November.

Turning to wages, average hourly earnings rose 0.3 percent in December after gaining 0.4 percent in November. The consensus had projected a 0.2 percent gain for December.

Turning to the household survey, the civilian unemployment rate surged to 7.2 percent from 6.8 percent in November. Household Survey numbers underwent annual revisions with this report. The November unemployment rate had been originally estimated at 6.7 percent. The December rate topped the consensus forecast for 7.0 percent. December's number is the highest since 7.3 percent for January 1993.

The December employment report shows the recession worsening. This is seen in the fact that job losses were much worse in the second half of 2008 than the first-1.7 million versus 0.9 million. While December's numbers were close to market expectations, downward revisions to the prior two months indicate that the labor market is in worse shape than previously believed. This will keep the consumer sector very much in a defensive mode – which is not good news for the economy.

Consensus Outlook
Nonfarm payroll employment in November fell over a cliff with a 533,000 drop, following a revised fall of 320,000 in October. The November drop was the worst since the 602,000 decline in December 1974. Nonfarm payroll employment fell every month in 2008. Average weekly hours edged down to 33.5 hours from 33.6 hours in October. Looking at wage pressure data, average hourly earnings rose 0.4 percent in November after increasing 0.3 percent in October. Turning to the household survey, the civilian unemployment rate spurted higher to 6.7 percent from 6.5 percent in October.

Nonfarm payrolls Consensus Forecast for December 08: -500,000
Range: -750,000 to -300,000

Unemployment rate Consensus Forecast for December 08: 7.0 percent
Range: 6.8 to 7.1 percent

Average workweek Consensus Forecast for December 08: 33.5 hours
Range: 33.2 to 33.5 hours

Average hourly earnings Consensus Forecast for December 08: +0.2 percent
Range: 0.0 to +0.3 percent

The most closely watched of all economic indicators, the employment situation is a set of monthly labor market indicators based on two separate reports: the establishment survey which tracks 650,000 worksites and offers the nonfarm payroll and average hourly earnings headlines and the household survey which interviews 60,000 households and generates the unemployment rate.

Nonfarm payrolls track the number of part-time and full-time employees in both business and government. Average hourly earnings track employee pay while the average workweek, also part of the establishment survey, tracks the number of hours worked. The report's private payroll measure excludes government workers.

The unemployment rate measures the number of unemployed as a percentage of the labor force. In order to be counted as unemployed, one must be actively looking for work. Other commonly known data from the household survey include the labor supply and discouraged workers.  Why Investors Care
During the mature phase of an economic expansion, monthly payrolls gains of 150,000 or so are considered relatively healthy. In the early stages of recovery though, gains are expected to surpass 250,000 per month.
Data Source: Haver Analytics
The civilian unemployment rate is a lagging indicator of economic activity. During a recession, many people leave the labor force entirely, so the jobless rate may not increase as much as expected. This means that the jobless rate may continue to increase in the early stages of recovery because more people are returning to the labor force as they believe they will be able to find work. The civilian unemployment rate tends towards greater stability than payroll employment on a monthly basis. It reveals the degree to which labor resources are utilized in the economy.
Data Source: Haver Analytics

2009 Release Schedule
Released On: 1/92/63/64/35/86/57/28/79/410/211/612/4
Release For: DecJanFebMarAprMayJunJulAugSepOctNov

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