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U.S. Jobs Reports Consistent With Weak GDP Growth

ByThe National Bank of Canada
Published 09/09/2012, 06:37 AM
Updated 05/14/2017, 06:45 AM

So much for the forecasting powers of the ADP whose strong number had raised hopes earlier about the employment situation. But the labour market remains fragile as evidenced by the weak nonfarm payrolls (only 96K jobs added in August, with downward revisions of 41K to the prior two months) and a second successive employment decline in the household survey (-314K in the last 2 months).

True, the unemployment rate fell to a four-month low of 8.1%. But that’s entirely due to people giving up the job search as reflected by the drop in the participation rate to 63.5%, the lowest since 1981. The small gains in full-time jobs in August did little to significantly alter a trend that’s been apparent since Q2, with a move away from full-time and towards part-time jobs.

That has contributed to limit growth in hours worked to less than 0.5% annualized over the Q2-Q3 period. We haven’t seen such weakness since 2009. As today’s Hot Charts show, barring a spectacular increase in productivity, that should translate into weak GDP growth in Q3 as well.
Jobs Reports Consistent With Weak GDP Growth
Given Chairman Bernanke’s emphasis on labour markets, this general weakness in employment suggests the Fed will downgrade its forecasts at the FOMC’s September meeting. That’s not to say that QE3 will be dispatched this month, but it’s clear that the probability of QE action sooner rather than later, has increased significantly.

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