January 11, 2009 |
|The December employment report was dismal much as markets had expected. But October and November declines were revised down sharply. Nonfarm payroll employment in December plunged 524,000, following a drop of 584,000 in November and a fall of 423,000 in October. Payroll jobs have contracted every month in 2008 for a cumulative loss of 2.6 million this past year—the largest yearly drop since the end of World War II. The December nose dive in nonfarm employment was a little worse than the published market forecast for a 500,000 decrease. But actual expectations were lowered after Wednesday’s very negative ADP report. The November and October figures were revised down a net 154,000.|
Employment cuts in December were felt across the board. The latest decline was led by the service-providing sector which lost 273,000 jobs. The largest job losses were seen in trade & transportation, down 121,000, and in professional & business services, down 113,000.
Goods-producing industries had 251,000 fewer jobs in December. Manufacturing and construction declined by 149,000 and 101,000, respectively. Natural resources & mining slipped 1,000.
On a year-on-year basis, nonfarm payroll employment growth fell to down 1.9 percent in December from down 1.5 percent the month before.
Average weekly hours fell to 33.3 hours from 33.5 hours in November.
Turning to wages, average hourly earnings rose 0.3 percent in December after gaining 0.4 percent in November. The consensus had projected a 0.2 percent gain for December.
Turning to the household survey, the civilian unemployment rate surged to 7.2 percent from 6.8 percent in November. Household Survey numbers underwent annual revisions with this report. The November unemployment rate had been originally estimated at 6.7 percent. The December rate topped the consensus forecast for 7.0 percent. December’s number is the highest since 7.3 percent for January 1993.
The December employment report shows the recession worsening. This is seen in the fact that job losses were much worse in the second half of 2008 than the first—1.7 million versus 0.9 million. While December’s numbers were close to market expectations, downward revisions to the prior two months indicate that the labor market is in worse shape than previously believed. This will keep the consumer sector very much in a defensive mode – which is not good news for the economy.
Market Consensus Before Announcement
Nonfarm payroll employment in November fell over a cliff with a 533,000 drop, following a revised fall of 320,000 in October. The November drop was the worst since the 602,000 decline in December 1974. Nonfarm payroll employment fell every month in 2008. Average weekly hours edged down to 33.5 hours from 33.6 hours in October. Looking at wage pressure data, average hourly earnings rose 0.4 percent in November after increasing 0.3 percent in October. Turning to the household survey, the civilian unemployment rate spurted higher to 6.7 percent from 6.5 percent in October.
Nonfarm payrolls Consensus Forecast for December 08: -500,000
Range: -750,000 to -300,000
Unemployment rate Consensus Forecast for December 08: 7.0 percent
Range: 6.8 to 7.1 percent
Average workweek Consensus Forecast for December 08: 33.5 hours
Range: 33.2 to 33.5 hours
Average hourly earnings Consensus Forecast for December 08: +0.2 percent
Range: 0.0 to +0.3 percent