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Analysis

US non-farm payrolls

by Gabriel Stein

Mon 13 Jan 2014

US non-farm payrolls Enlarge Chart loading Image

What the chart shows: The chart shows the monthly change in US non-farm payrolls, in thousands.

Why the chart is important: Unemployment is a lagging indicator. The December non-farm payrolls data show us what American businesses thought in October and November that they would need to do with their labour force in December. This data is also highly volatile and prone to substantial revisions in the two months following the original publication (over the past three years, the average monthly revision has been 60% of the original number). Nevertheless, because the Federal Reserve has tied its policy to unemployment developments, this is also one of the most important statistics in the monthly calendar. The weak December data (a rise of 74,000, following a year when the monthly average was 171,000) has given rise to concern that the Fed has jumped the gun with its QE taper. This is not the case. The December number was heavily affected by bad weather (as the January number is likely to be as well). The three-month moving average – a better guide to the trend – remains healthy. And other data point to the continued strength of the economy. The weak December (and probably January) payroll numbers are therefore likely to prove a blip. And the Fed will continue and accelerate its taper, as the economy moves to above-trend output growth.

Chart and comments provided by Oxford Economics www.oxfordeconomics.com