As we have noted before, the classic economic cycle is that recession is followed by recovery and as the recovery gains traction, strong job growth is seen as companies engage staff to meet resurgent demand. This pattern has not been followed in (dare I say it?) the aftermath of the Global Financial Crisis. This point is underlined by the current employment figures for August, issued by the US Department of Labor. The data shows that unemployment has fallen to 7.3%; its lowest level since December 2008 and that 169000 new jobs were created in July. Analysts had expected to see the creation of a further 18000, so they represent disappointing data.
The reduction in the level of unemployment was partially due to the fact that a number of Americans had stopped actively looking for work and was therefore no longer included in the unemployment figures. The Labor Department also reduced its figure for jobs created in July from 162000 down to 104000 meaning that July saw the weakest level of job creation in more than a year. The US economy needs to create approximately 160000 new jobs per month to cater for population growth. The revised data means that the US economy is only just meeting this mark for 2013 so far.
The Federal Reserve has said that the trigger point for tapering its $85 billion per month asset purchase stimulus package is for employment to sink below the 6.5% mark. Despite this, there is considerable expectation amongst analysts that are anticipating some stimulus measures to be withdrawn as early as this month. Inevitably, such speculation pushes stocks (and the Dollar) lower when it gains traction. The stimulus measures in place around the world cannot continue indefinitely, but the IMF has urged that caution needs to be exercised as they are (eventually) withdrawn.