The massive slide in nonfarm payrolls, which started in early 2008, has practically come to an end. In November only 11,000 jobs were lost. The situation in the goods-producing sector remained soft, but the services sector has now stepped up recruitment again.
The labor market picture is even more encouraging when one takes the appreciable month-on-month rise in the average workweek into account. For the first time since mid-2007 aggregate hours worked were up by a notable 0.6%. The positive trends look set to continue in the coming months. This is being flagged above all by the ongoing decline in initial jobless claims and the positive outlook for industrial production as shown by the ISM index. Moreover, in our view employment has reacted excessively to the decline in overall output up to the second quarter of 2009. With goods demand heading up, it is therefore likely that there is some catching up to do.
In conjunction with the small rise in hourly earnings, the higher level of aggregate hours worked signals a tangible rebound in wage and salary income. The underlying backdrop for private consumption is improving noticeably, thus placing the economic recovery on a more solid footing.