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Employment Situation
Released On 2/6/2009 8:30:00 AM For Jan, 2009
PriorConsensusConsensus RangeActual
Nonfarm Payrolls - M/M change-524,000 -524,000 -750,000  to -450,000 -598,000 
Unemployment Rate - Level7.2 %7.5 %7.2 % to 7.6 %7.6 %
Average Hourly Earnings - M/M change0.3 %0.2 %0.0 % to 0.3 %0.3 %
Av Workweek - All Employees33.3 hrs33.3 hrs33.0 hrs to 33.4 hrs33.3 hrs

Highlights
The January employment report showed the economy worsening further with a third consecutive drop in payroll employment topping half a million. Nonfarm payroll employment in January plummeted 598,000, following a fall of 577,000 in December and a decline of 597,000 in November. Payroll jobs have contracted for thirteen consecutive months. The January plunge in nonfarm employment was worse than the published market forecast for a 524,000 drop. As with the previous employment report, actual expectations fell after a very negative ADP report the Wednesday before. The December and November figures were revised up a net 59,000.

Employment cuts in December were felt across the board. The latest decline was led by the goods-producing sector which shed 319,000 jobs. Manufacturing and construction declined by 207,000 and 111,000, respectively. Natural resources & mining decreased 1,000.

The service-providing sector also fell sharply by 279,000 with the largest job losses seen in professional & business services, down 121,000, and in trade & transportation, down 118,000.

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 were unchanged at 33.3 hours in January. Turning to wages, average hourly earnings increased 0.3 percent in January after rising 0.4 percent in December. The consensus had forecast a 0.2 percent gain for the latest month. It is likely that average hourly earnings are being kept on the high side by a shift in the composition of those still with jobs with more low-paying jobs being cut than high-paying jobs.

Turning to the household survey, the civilian unemployment rate jumped to 7.6 percent from 7.2 percent in December. The January rate was higher than the consensus forecast for 7.5 percent. The January number is the highest since 7.6 percent for October 1992.

The January employment report indicates that businesses are engaging in wholesale job cuts. This is likely to lead to further cutbacks by consumers which portend further economic contraction ahead. Today's numbers were worse than published forecasts but likely were close to expectations after this week's ADP report and jobless claims and likely will have only modest impact on the markets. Perhaps the only good news from the jobs report is that it is ammunition for the Obama Administration to push for passage of a stimulus plan.

Market Consensus before announcement
Nonfarm payroll employment for December was dismal as the number of jobs plummeted 524,000, following a drop of 584,000 in November. Payroll jobs contracted every month in 2008 for a cumulative loss of 2.6 million-the largest yearly drop since the end of World War II. Turning to wages, average hourly earnings rose 0.3 percent in December after gaining 0.4 percent in November. Wage gains were likely being kept a little high by the fact that average hourly earnings are not a fixed-weighted price index but one based on shifting components. During recession, the lower wage earners are typically cut first due to the cyclical sensitivity of low-wage retail trade and due to workers with fewer years experience often being cut first. The civilian unemployment rate surged to 7.2 percent from 6.8 percent in November. December's number was the highest since 7.3 percent for January 1993.

Nonfarm payrolls Consensus Forecast for January 09: -524,000
Range: -750,000 to -450,000

Unemployment rate Consensus Forecast for January 09: 7.5 percent
Range: 7.2 to 7.6 percent

Average workweek Consensus Forecast for January 09: 33.3 hours
Range: 33.0 to 33.4 hours

Average hourly earnings Consensus Forecast for January 09: +0.2 percent
Range: 0.0 to +0.3 percent

Definition
The employment situation is a set of labor market indicators based on two separate surveys in this one report. The unemployment rate equals the number of unemployed persons divided by the total number of persons in the labor force, which comes from a survey of 60,000 households (this is called the household survey). Workers are only counted once, no matter how many jobs they have, or whether they are only working part-time. In order to be counted as unemployed, one must be actively looking for work. Other commonly known figures from the Household Survey include the labor supply and discouraged workers.  Why Investors Care
 
[Chart]
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
 
[Chart]
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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