U.S. Unemployment Rate FallsSharply; Payroll Decline Is Modest

Past gloom in the job market eased last month. During January the unemployment rate fell to 9.7%, its lowest level since August. Expectations had been for a stable 10.0% unemployment rate. Nevertheless, the figure hardly suggests ebullience in the job market since the rate still is up two percentage points from last January. Moreover, the unemployment rate including marginally attached workers plus those working part time for economic reasons slipped m/m to 16.5% but remained up from 14.0% last January.

Noteworthy is that the overall unemployment rate's decline resulted from a 541,000 (-2.7% y/y) increase in employment. It was the largest monthly gain since November 2007 and reflected a 529,000 increase (-1.3% y/y) in adult female employment. Adult male jobs slipped 1,000 (-3.1% y/y). Along with the rise in the number of jobs came a 111,000 person increase in the labor force (-0.6% y/y) which was the first monthly gain since August. The labor force participation rate thus increased to 64.7% but remained down sharply from 66.0% during all of 2008. Continued severe weakness in the job market was indicated by the increase in the average duration of unemployment to 30.2 weeks.

Accompanying improvement in the household survey was just a modest 20,000 worker decline in the establishment survey measure of nonfarm payrolls. Any easing of the weakness, however, is mitigated by the benchmark revision which lowered employment by roughly 825,000 last year. Since the recession began in December of 2007, payrolls have thus declined by 8.4 million. A 13,000 increase in nonfarm payrolls was the Consensus expectation.

Factory sector payrolls, with an 11,000 increase, posted their first monthly gain in three years. Private service sector employment also rose, for the second time during this economic recovery, due to a 44,000 increase (-3.3% y/y) in professional & business services employment. Also improved was the number of temporary help services jobs which rose for the fourth straight month (-0.5% y/y). Counter to these improvements, construction employment fell 75,000 which was the largest decline since July. Overall the diffusion index of employees on private nonfarm payrolls rose to 46.8% which was the highest level since March of 2008. In the government sector payrolls slipped 8,000 (-0.5% y/y) despite a 33,000 rise in federal government hiring associated with the taking of the census. State government employment fell 18,000 (-0.8% y/y) and local employment was off 23,000 (-0.9% y/y).

The length of the average workweek also showed improvement, albeit slight. The rise to 33.3 hours was the third rise in the last four months. Together with the diminished decline in employment it raised the level of aggregate hours worked by 0.3% from December and by 0.5% from the 4Q average.

Average hourly earnings improved with the lessened job losses and rose 0.3% which the largest rise since October. Nevertheless, y/y growth fell to 2.5% which was near the cycle low and down from 3.8% growth in 2008.

The figures referenced above are available in Haver's USECON database. Additional detail can be found in the LABOR and in the EMPL databases.

The six-month progressions show that the OECD LEIs are getting progressively stronger. Over 12-months growth rates are positive; annualized rates accelerate over six months but growth rates backed off over three months.

The OECD and its main countries are showing consistent and strong growth rates over the most recent six months.

The 7% to 10% growth rates over 12-months are in excess of what we have seen in the past two recoveries. Japan is still lagging in this cycle with a 12-month gain of only 3.5%. But the e-Zone is up by 9.7% and the US indicator is up by 7.3% over 12 months. Japan is showing strong growth in its LEI over three-months.

The OECD series still seems to endorse the idea of a recovery that will gain momentum and become strong.