The U.S. labor market gave skeptics an “In yo face!” memo when the October NFP report showed that the number of jobs added during the month almost tripled the expected 63,000 figure. I’m talking about firms welcoming 151,000 Janes and Joes into the workforce, y’all!
What made the deal sweeter was that the headline figure for September saw an upward revision to -41,000, after it was initially reported that the economy lost 95,000 jobs.
Now, it seems like pessimism over the U.S. labor market has vaporized since the November NFP report is expected to reveal that 145,000 more jobs were created. And given the recent employment figures we’ve seen, it’s not hard to imagine why almost everyone is keeping their hopes up.
For instance, the November’s ADP employment report, which many consider as a preview of the NFP, printed its biggest gain in three years with an increase of 93,000 in payrolls. We also saw that, in the same month, the number of people filing for unemployment benefits fell to its lowest level since July 2008.
But are these upbeat figures enough to knock the unemployment rate down from 9.6%? Job creation needs to be faster in order to have a significant effect in the labor market, but the prospects seem grim. For one thing, more than 400,000 individuals are still filing for employment claims each week, which means that almost half a million Americans are losing jobs weekly.
It also doesn’t help that the U.S. Congress is planning to stop providing benefits for the jobless. Roughly 8,400 individuals will lose their unemployment benefits by the end of this week, as lawmakers decided against extending the jobless aid program in order to trim government spending. Well, that can’t be good for consumer spending! And if spending and growth take a hit, job creation may also suffer.
So what if a few dark spots are starting to pop up in the U.S. economy? It’s the positive surprises in the recent economic reports that count, right?
For the near term, yes. But in the greater scheme of things, what’s more important is the bigger picture. That’s precisely what hotshot international organizations, such as the United Nations, are worried about.
In its latest analysis of the global economy, the U.N. projected a 10% unemployment rate for the U.S., with the possibility of a double-dip recession. Yikes! They warned that unless the Obama administration and the Congress come up with more economic stimulus, dark and difficult times lie ahead of the country.
The U.N. also stated that the lack of coordination in monetary responses among the major economies could weigh on the effectiveness of the government’s plans. Consequently, this could inspire more uncertainty in the financial markets. Double yikes!
Risk aversion in markets and recent developments in the U.S. labor figures might be giving the Greenback a push, but from what I’ve heard, the dollar’s honeymoon period with traders could come to an end if the NFP report fails to impress.
Stay tuned to the big NFP report tomorrow at 1:30 pm GMT to see if it will help or hurt the U.S. economy’s chances of convincing investors that the Greenback is still the king of the hill.