The US Department of Labor released the latest set of figures on unemployment in the USA on Friday. At first sight, the data looks like unbridled good news with December unemployment falling to a five year low of 6.7%. However, as they say, the Devil is in the detail. Improvements in monitoring unemployment, cynics might say meddling by political spin doctors, mean that only those actively seeking employment can be considered to be amongst the ranks of the unemployed. Analysts believe that a substantial proportion of the reduction in the ranks of the unemployed seen last month, is due to people giving up on finding work and so falling out of the statistics.
A critical underlying figure in the US unemployment figures is the number of new jobs being created each month. About 125000 new jobs need to be created each month for employment to keep pace with population growth in the States. In December, the number of new jobs created was a disappointing 74000 jobs; this compares to the November figure (adjusted upwards) of 241000. The December figure is particularly weak when compared to the average job creation figures for the previous four months which came in at 214000 and was key in the Federal Reserves’ decision to start the “Taper” of its asset purchase scheme this month. Indeed, the December job creation level is the lowest seen for three years.
Of the jobs created, the manufacturing and leisure sectors took on new staff, but 16000 jobs were lost in the construction industry which was the steepest decline seen for 20 months. The construction figures lend some credence to the idea that the creation of jobs was hit by a particularly cold spell in the month, but clearly, this would be more marked in sectors where workers work outdoors. The Taper, by its very nature, is a gradual process, and the safe money is on no new measures being announced this month before the Fed can determine if the December figure is just a blip or not.