US Employment Report Flash: Nonfarm Payrolls Rise 200K

The US Employment report turned out to be even better than we speculated this morning though some revisions to November balance it out somewhat. Nonfarm Payrolls rose 200K while the Unemployment Rate dropped by 0.2 percentage points to 8.5% due mostly to employment (+176K as detailed below) as the Participation Rate held steady at 64%.

Overview for December (November):

Nonfarm Payrolls at 200K vs. 155K expected and 100K prior.
Private Payrolls at 212K vs. 178K expected and 120K prior.
Manufacturing Payrolls at 23 vs. 6K expected and 1K prior.
Unemployment Rate at 8.5% vs. 8.7% expected and 8.7% prior (lowest rate since February 2009).
Participation Rate at 64% vs. 64% prior.
Average Hourly Earnings at 0.2% vs. 0.2% expected and 0% prior.
Average Weekly Hours at 34.4 vs. 34.3 expected and 34.3 prior.
Change in Household Survey Employment at 176K vs. 317KK prior.
All in all, a better than expected report, which showed strength in both surveys. In the Establishment Survey Nonfarm Payrolls printed 200K while in the Household Survey the Unemployment Rate dropped to 8.5% and the Change in Employment increase 176K. The latter has increased 1.456 million in the second half of 2011.

Sectorally, manufacturing and professional, scientific, and technical services were the big winners this month, recording gains of 30,400 and 16,100, respectively. Public sector hiring fell by 17,300 net positions, offset mainly by 31,100 gain in self-employed individuals.

At 2.2%, wage gains held relatively steady in December. This rate is well above the 1.3% average pace recorded in the previous 4 months.

As has been the case throughout this recession and recovery, the job gains have been concentrated decidedly among older workers. Those aged 55 years and over recorded gains of 24,000 in December, while positions open to those aged 15-24 fell by 16,800. The unemployment rate for younger workers remained steady at 14.1%, almost double the national average.

Key Implications

Today's job gains were certainly welcome news after two months of significant declines. However, neither the gain nor the underlying details would suggest any reversal of fortune for the Canadian economy as the 3-month moving average fell by more than 18,000 jobs. High levels of uncertainty surrounding any number of international developments, notably the European debt crisis, have clearly shaken the confidence of both consumers and businesses.

This is unlikely to abate in the coming year. Government hiring is likely to remain under pressure in the coming months and private sector hiring will likely be tested by further deterioration in Europe's debt crisis.

All said for the coming year, TD Economics expects the unemployment rate to continue treading higher, likely to about 7.7%, while job gains will average a paltry 10,000 per month, more heavily weighted to the second half of the year.

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