NFP: 85,000 JOBS LOST IN DECEMBER. MUCH MORE THAN EXPECTED

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The December Employment Situation Report has been released. 85,000 jobs were lost in December, much worse than expected. The unemployment rate was unchanged at 10.0%. The November report was revised to 4,000 jobs created vs. the original print of 11,000 jobs lost.

HERE IS WHAT TICKED ACROSS MY NEWS FEED:

  • U.S. DEC NONFARM PAYROLLS -85,000 (CONSENSUS UNCH) VS NOV +4,000 (PREV -11,000)
  • DEC JOBLESS RATE 10.0 PCT (CONS 10.1 PCT) VS NOV 10.0 PCT (PREV 10.0)
  • DEC AVERAGE HOURLY EARNINGS +0.2 PCT (CONS +0.2) VS NOV +0.2 PCT, TO $18.80 VS NOV $18.77
  • DEC YEAR-ON-YEAR AVERAGE HOURLY EARNINGS +2.2 PCT
  • DEC AVERAGE WORKWK 33.2 HRS (CONS 33.2) VS NOV 33.2, FACTORY 40.4 VS 40.4, OVERTIME 3.4 VS 3.4
  • OCT NONFARM PAYROLLS REVISED TO -127,000 FROM -111,000, SEPT UNREVISED AT -139,000

The broader measure of unemployment, U6, indicates 17.3% of the labor force is unemployed. The civilian labor force fell by 661,000 people. That is a HUGE reduction in the labor force. HUUUUGE. This implies when jobs start being created that the unemployment rate will actually move higher as discouraged workers re-enter the work force.  Unfortunately many of those people will find it difficult to land their old job as a good portion of previous positions will likely be lost forever (lost to technology and productivity).

HERE IS A TABLE SUMMARIZING THE DATA. NOTICE THE HUGE UPTICK IN JOB LOSSES IN THE GOODS PRODUCING AND CONSTRUCTION INDUSTRY. ALSO, "TEMPORARY HELP" FELL AFTER FIVE MONTHS OF GAINS.

HERE IS A CHART OF THE DATA. NOVEMBER 2009 WAS THE FIRST MONTH JOBS WERE CREATED SINCE DECEMBER 2007.

My initial reaction: THANK GOODNESS

The general perception that the economy is in recovery mode is a misconception. The economy has stabilized and made marginal improvements off of record low levels of activity. Stock market gains and month over month and year over year improvements (from record low levels) in economic activity are not a true indication of overall macroeconomic well being. There are still a ton of uncertainties in economic outlooks, we are not out of the woods yet.

A better than expected jobs report (or "on the screws") would have added momentum these "misconceptions of economic reality". This sentiment would have put pressure on the Federal Reserve to raise benchmark interest rates because markets would have likely priced in (discounted) increased inflationary anxieties. This would have had detrimental effects on the Treasury market and the overall economic landscape as increased government borrowing costs would have forced consumer borrowing costs higher....thus hampering consumer spending and slowing the recovery process. 

THANK GOODNESS