The US employment report for December caught us and the market off guard by printing a sharp -85k decline on the month. Consensus was for a flat read, so the ensuing US dollar weakness was not surprising. The guts of the report are nothing to write home about and do not suggest much in the way of optimism for the US employment picture. While the unemployment rate did remain unchanged at 10.0%, this was only possible because of a decline in the labor force. The all-encompassing unemployment rate (which includes discouraged folks and those working part-time for economic reasons) actually inched up to 17.3% from 17.2% prior. The other data point that stuck out like a sore thumb was the change in household employment which came in at a dreadful -589K, the worst since September. This metric tends to turn positive in a consistent fashion around turning points, so the sharp drop is cause for concern. The "blame it on the weather" crowd was out in full force, casting doubt on the sharp headline decline. While they are correct that the subtraction to jobs from folks who were unemployed due to weather was about 100K larger than usual, one must also keep in mind other statistical massaging the BLS has done throughout 2009. One of the areas of interest is the birth/death additions that have assumed business growth in the face of collapsing commercial real estate and deplorable capital expenditure data. Splitting hairs aside, the December report does not offer up much confidence in terms of any significant rebound in the US jobs market. What is more likely is a similar path as was taken in the post-2000 recession when the words "jobless recovery" entered the lexicon. This time, however, the path back to so-called full employment is likely to be even more drawn out. Indeed, conservative estimates suggest that we will not see the December 2007 employment levels until well into 2015. That is not to say that the economy won't grow during this time, but grow and grow marginally are two very different things.
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