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TD Economics
February 6, 2009

• U.S. nonfarm payrolls dropped a further massive The details of the report were quite grim. As has been
598K in January the case in the past few months, virtually every sector posted
• The unemployment rate surged to 7.6% job losses, with only the acyclical government (+6K) and
• Net revision was -385K for all of 2008 education and health sector (+54K) posting any gains. On
the other hand, there were dramatic losses in construction
The U.S. economy shed a further 598K jobs in Janu- (-111K), manufacturing (-207K), trade and transportation
ary, bringing the number of jobs lost so far since the cycli- (-118), and business services (-121K). And the losses were
cal peak of January last year to 3.6 million, which is well equally split between the goods-producing (-319K) and serv-
over the 2.8 millions jobs lost during the recession of the ices-producing (-279K) sectors.
early 1980s. Market consensus was for a more modest In terms of wage pressures, average hourly earnings
loss of 540K. The loss in January represented the biggest rose to 4.4% Y/Y from 3.9% Y/Y in December, while av-
monthly drop in the ranks of U.S. employment in the post- erage weekly earning eased to 2.4% Y/Y from 2.6% Y/Y.
war period, and was the third consecutive month in which And as an indication of further rationalisation in hours
over half-million jobs have been lost in the U.S. The an- worked, total private sector weekly hours declined for the
nual 2008 revisions reported in this release revealed a net fifth consecutive month in January, falling by 0.7% M/M,
loss of 385K jobs. Arguably, this report would have been following the 0.8% M/M drop in December. This is roughly
even worse if January weather conditions had not been twice as large a drop as one would have expected given
unusually friendly – this prevented the loss of a further the number of jobs lost.
118K jobs. With the U.S. economy well into what is widely ex-
The unemployment rate spiked to 7.6% (from 7.2% in pected to be its most intense and prolonged recession since
December), and is now the highest rate of joblessness the Great Depression, the job losses have not only mounted,
since the 1990 recession. And when “discouraged” work- but with the economy expected to weaken even further
ers are added to the mix the rate rises to 8.0% from 7.6% there is every indication that job losses will climb even more
in December. The rate of “underemployment” is also quite as employers continue to shed jobs in the face of plunging
troubling, and the inclusion of these workers pushes the consumer demand for their products.
rate to 13.9% in January, from 13.5% in December.
Millan Mulraine
Economics Strategist
TD Securities

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TD Economics Commentary February 6, 2009

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TD Economics Commentary February 6, 2009