December 2011 Employment Report

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According to the Bureau of Labor Statistics (BLS) non-farm payroll employment rose by 200,000 in December, and the unemployment rate dropped to 8.5 percent. Over the past 12 months, nonfarm payroll employment has risen by 1.6 million. Employment in the private sector rose by 212,000 in December and by 1.9 million over the year. Employment in transportation and warehousing rose sharply in December (+50,000). Almost all of that gain resulted from seasonal hiring in the couriers and messengers industry (+42,000). Government employment changed little in December but was down by 280,000 over the year. Public sector job losses during 2011 were concentrated in local government; state government, excluding education; and the U.S. Postal Service. The change in total nonfarm payroll employment for October was revised from +100,000 to +112,000, and the change for November was revised from +120,000 to +100,000.
 

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As we have been pointing out for quite some time, employment is converging with the previous peak at a slower pace than any prior recession going back to 1973. The economy still has 6.0 million fewer jobs than at the beginning of the 2007 recession.

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Also, the number of persons not in the labor force reached a new high of nearly 87 million. In addition, the ratio of employed persons relative to the total population (EPR) has barely budged off its February 2010 low; the EPR is at levels comparable to those seen in the late 1980s.
 

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The civilian labor force participation rate remained at 64.0 percent, while the annual percentage increase in average hourly earnings of production and non-supervisory employees ticked higher to just over 1.6 percent, barely above the historical low set back in February 2004. With the consumer price index for urban consumers rising at a 3.4 percent annual pace, wages are falling in real terms (i.e., wage increases are not keeping up with price inflation).
 

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On a somewhat brighter note, part-time employment fell by 371,000 jobs while full-time employment increased by a more substantial 553,000. The declining trend for part-time employment appears to be strengthening; the full-time trend is solidly, although modestly, higher if viewed from January 2010.

In summary, this employment report was better than expectations, but then expectations are rather low.