The US unemployment rate ticked down to 8.1% (from 8.3%); the broader underutilization rate decreased to 14.7% (from 15.0%).
- The US labor market continues to tread water with +96k jobs created in August, well below consensus estimates of +125k and the +149k average monthly growth rate in 2012; further pouring salt in the wound, June and July employment figures were collectively revised downward by -38k.
- The total number of unemployed (12.5M) decreased slightly while the long-term unemployed - those out of work for 6+ months also shrank to 40.0% (from 40.7%).
- Quite alarming, 368k workers left the labor force last month…this was the primary driver of the decrease in the unemployment and underutilization rates.
Americans still hungry and thirsty…services up as well.
- In a sign that may speak to improving sentiment and consumer resiliency, food services and drinking places continued to gain (+28k; +300k over the last 12 months) while other service-related sectors also grew: professional and technical (+27k which includes gains in computer-related (+11k) and consulting (+9k) services), health care (+17k) and utilities (+9k).
- Manufacturing shed 15k jobs last month as companies remain weary of increasing payrolls given the lingering economic struggles in the EU and China and the cloud of uncertainty caused by the US' looming fiscal cliff.
- The public sector continued to shed jobs with the most losses being experienced at the state and local government levels (-7k).
What’s in store? Key watch items…
On the bearish side:
- The decline of the middle class. Based on a study by the National Employment Law Project (NELP), the market for middle class jobs has shrunk with most job creation occurring in lower paying areas (see the aforementioned trend in food and drinking). Consider the following: mid wage occupations (as based on median incomes) suffered 60% of the job losses during the recession but accounted for only 22% of job growth during the recovery. In contrast, higher wage occupations lost 19% but grew by 20% and lower wage occupations lost 21% but grew by 58%. This evolving structural change will continue to "hollow out" the middle class and may serve as a long-term weight on the US economy.
- The jobless generation? The International Labor Organization predicts that Euro zone youth unemployment (for 15-24 year olds) will remain above 21% through 2017; in the US, it will range between 13-17%. The impacts of temporary and long-term unemployment among this group may be catastrophic leading to future generations being trapped in lower paying jobs and talent shortages as younger workers are deprived of opportunities to develop skills and/or move abroad.
On the bullish side:
- Euro zone. Hard to believe that the EU would be on the bright side of the ledger given its ongoing struggles. However, there is some cause for hope and change (apologies…I watched President Obama's speech last night). Given the ECB's decision to stabilize struggling government debt markets through the unlimited purchase of short-term bonds (thus lowering borrowing costs and infusing the likes of Spain and Italy with much needed capital to run their countries), it is hoped that this move will go a long way towards quelling their crises. The catch: countries that avail themselves of this solution must agree to additional budget cuts and economic reforms…a tough political sell.
- Household debt. While much has already been made about the housing market recovery, another positive trend to note is the US' gradually decreasing household debt. Total US household debt fell by 0.5% in Q2 to $11.38T, almost entirely due to falling mortgage balances. With further debt reduction, this may put US consumers on firmer financial footing.
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