A Closer Look at December 2010 NFP Data

By now, you saw the headline data: Unemployment fell 0.4% to 9.4%; NFP increased by 103,000 in December.

Let’s take a closer look at what the data suggests:

• Unemployed persons decreased by 556,000 to 14.5 million in December
• Long-term unemployed (jobless for 27+ weeks) was unchanged at 6.4 million (44.3% of Unemployed)
• Average workweek was unchanged at 34.3 hours
• Temporary help trended up in December (+16,000); Note this sector is +495,000 since September 2009.
• Average hourly earnings increased 3 cents (0.1%) to $22.78.
• These 3 aspects of NFP — hours worked, temp help and wages — are the leading indicators with in NFP, which overall tends to be a lagging indicator. They were at best modestly positive.
• Revisions continue to be positive: October revised from +172,000 to +210,000, November revised from +39,000 to +71,000.
• Labor force participation rate slid to 64.3, accounting for some of the U3 rate change to 9.4%; U6 fell 0.3% to 16.7%
• Biggest sector gainers were leisure and hospitality (+47,000), health care (+36,000) and professional services (+16,000)
• Labor force participation rate slid to 64.3, accounting for some of the U3 rate change to 9.4%

The Labor market still faces several major headwinds:

1. Post credit-crisis recoveries tend to be weak ion terms of both GDP and job creation. This recovery is no different;

2. States and municipalities face growing budget gaps; they are freezing hiring and cutting headcount.

3. The Residential Housing market remains somewhat over-priced, with bloated inventory and a disinterested pool of buyers.

4. Consumers continue to deleverage and add to savings. The Paradox of Thrift has put a cap on the slowly improving retail environment

All told, this was a mixed employment report, but within normal parameters for this recovery.

The silver lining is the Fed has no cause to take their foot of the QE accelerator . . .

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