The US private sector added 113,000 jobs in December according to the Department of Labor; 297,000 according to ADP. Seasonality might be the reason for the disparity; I believe that the two numbers will converge as seasonal adjustments kick in during the next months. The focal point should be that unemployment decreased to 9.4%, the lowest since May 2009 (which I believe was the point in time that US economy adjusted to the post-crisis level of economic activity). Therefore, at this point the economy has to deal with structural unemployment created from jobs lost in specific sectors over the years that found a way to materialize during the crisis. Unfortunately most of these are not coming back, and unfortunately the long term unemployed are not going to get back to work easily. So it’s not myopic to focus on the unemployment rate. Since employers won’t hire somebody who is long term unemployed or in a diminished job sector, that means that for the ones with a job things are getting better. This will lead to salary and price inflation and progressively erase negative mortgage values and low real estate prices (all right I’m not forgetting lower consumption and consumer credit due to unemployment but even if some people get back to work the benefit would be marginal considering their probably reduced wages or low spending). At the same time long term unemployed will have to be supported by the state increasing federal spending and deficits, hence more inflation. Well, this is not going to be good news for the high net worth individuals but one can’t have it all. Probably this is the milder way out of the crisis; without seemingly taking tough decisions. One however can’t help but ponder over the long term unemployment issue. As the economy seems to be doing pretty well without them as indicated by corporate profits and the stockmarket; this probably turns to be more of a social issue. Europe is able to function pretty well with 10% or even higher levels of employment. However Europe operates under a much different social and economic model that allows this type of phenomena. Also wanted to note the fallacy of trying to address current economic problems with recipes of the past when markets were not globalized. Right now lower interest or tax rates won’t necessarily lead to investment in the US because for a global firm it might be advantageous to do so somewhere else. The jury is still out on how economies will adjust over these circumstances but for the time being let’s stay with the positive note on the latest jobs report.
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