ECONOMETER

The US jobs report released last week was also not as clear cut as the headline figure suggested. The 539k drop in April payrolls was the smallest decline since October last year. Markets reacted well to the data, with equities continuing to rally as it was taken as yet another sign that the worst is over and compared favourably with the average Q1 monthly payrolls decline of 707k. The US has now lost 5.7 million jobs in a period of 16-months with the bulk of these in the past few months alone.

Nonetheless, the headline drop in payrolls masked the fact that there was a large temporary 72k boost from government hiring due to the upcoming 2010 US census which was a one off boost to hiring before real census hiring begins in the spring next year. Negative revisions to the data subtracted 66k from past payrolls, meaning that past months jobs losses were worse than initially reported. Moreover, the unemployment rate pushed higher, reaching 8.9%, the highest rate since late 1983 and is likely to reach at least 9.5% over coming months if not double digits.

As noted in a previous post “No `green shoots’ in the jobs market”, it will take a long time before the jobs picture turns around. Even the US administration admits that positive employment is unlikely until 2010. Moreover they admitted that growth will have to pick up to around 2.5% before unemployment will fall and this is highly unlikely before some months.