Better jobs news unfavourable for liquidity outlook
Simon Ward
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A recent post suggested that the surprise of the next six months would be the speed of the turnaround in labour markets. US payroll employment continued to decline in November but the fall of 11,000 was much smaller than expected while earlier months' figures were revised up substantially.
The details of the payrolls survey were also encouraging, showing rises in weekly hours and temporary jobs – both tend to lead overall employment. The unemployment rate, based on a survey of households, retreated from 10.2% to 10.0% last month but this partly reflected a contraction of the labour force while an equivalent jobs measure from this survey was weaker than "official" payrolls.
The official series looks poised to grow from December, judging from a jobs gauge based on the ISM manufacturing employment index, the monthly lay-off tally by Challenger, Gray and Christmas and the NFIB small firm hiring plans index – see chart.
Better labour market news will reduce worries about a "double dip" but will call time on current super-loose monetary policies, suggesting the removal of an important support for equity markets and other "risky" assets in early 2010.
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