US employment change

US non-farm employment change and unemployment rate, January 2012

US employment change

Further encouraging news on the health of the world’s largest economy came today as employment levels saw a strong boost and the unemployment rate fell back to its lowest since February 2009.

Data released by the United States Bureau of Labor Statistics (BLS) showed that non-farm employment rose by 243,000 in January, compared to an upwardly revised figure of 203,000 in December. This is particularly good news compared to market expectations of an increase of 150,000 and the estimates of ADP, a payroll processor, of 170,000.

The unemployment rate fell back to 8.3% in January, the fifth consecutive month of improvements. The last time that the unemployment rate was this low was almost three years ago, before the rate had started to rise in earnest following the recession of 2008-09. These latest figures suggest that peak unemployment following the downturn is well past, although risks do still remain.

Today’s release is the second positive one from the US this week, as figures from the manufacturing sector point toward an increasing rate of expansion. The Institute of Supply Managers Purchasing Managers Index rose to 54.1 in January from 53.1 the month before – where anything above 50.0 indicates positive growth. These figures corroborate today’s labour market release, which detailed an increase in manufacturing employment of 50,000 – largely in durable goods. The sector has added 418,000 jobs over the past two years.

Cebr predicted that the US will be the star economic performer of the Western world in 2012, and certainly the States have got off to a flying start this year.

However, threats to economic growth over the coming months persist – a global slowdown will constrain the pace of US recovery. Neighbouring Canada looks to have suffered from a contraction at the end of 2011, while growth in China and other emerging nations is set to cool and a slump in the Eurozone will weigh heavily on output prospects. In addition, the relatively strong US GDP growth figure for Q4 2011 was driven largely by restocking, an impact that could easily be reversed as inventories wind back down.

Overall today’s news is good, but threats to the economy remain and unemployment is still high by US standards. America’s many jobless are not out of the woods yet.