Before the US employment report for December was released early this morning, a number of economists and strategists were guessing that the country would be able to produce more than 190,000 net new jobs. Many of those prognosticators where speculating that the number could be as high as 225,000.
Instead, the number was only 74,000, one of the biggest economic misses I have seen in a long time.
Initially, a common response that I heard was that employment was weak because the weather was bad. But, economists already knew the weather was bad and they stuck to their rosy forecast. (If they didn’t know the weather was bad, then they must not own TVs or don’t have access to the internet as the topic of weather has dominated the headlines for weeks now).
The US labor participation rate also fell to a new low not seen since 1978. This actually helped the US national unemployment rate fall from 7.0% to 6.7% in December, but that is not much consolation when looking at the overall picture.
And remember, these anemic employment numbers are being produced despite the mind-boggling amounts of liquidity pumped into the US economy with the stated goal of trying to improve employment. We have been skeptical of the efficacy of Quantitative Easing (QE) and continue to be proven right. While there has been some improvement in US employment, the marginal gains don’t justify the endless trillions of money being printed as part of an experimental monetary policy. And since 2010, QE has not been able to add anything more to monthly job creation (see chart above).
Right now most are still expecting the Fed’s tapering of QE to continue on schedule. But another month like the one that we just had might change things, regardless of how bad the weather.
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