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3 Jul 2014
US labor market gaining momentum, but 'shadow unemployment' still severely high - BNP Paribas
FXStreet (Łódź) - Alexandra Estiot, Senior Economist at BNP Paribas comments on the surprisingly strong US NFP report which showed an increase in hiring of 288K in June, saying that a momentum is definitely
building, although the level of underutilization of labor remains high.
Key quotes
"On a 3-month average basis, job creations reached 272k in June. On a year-on-year basis, payrolls growth is a notch below 2.5 million, i.e. the highest reading since the end of 2005."
"As we have argued for a long time, even if very strong over the last five months –and
longer, actually, if December 2013 and January 2014 are analysed as harsh winter related weakness –this pace is still insufficient for rapidly absorbing the very high level of under-utilised labour."
"What Janet Yellen recently called 'shadow unemployment' remains severely high. We can always argue about how to measure it, as the labour force participation rate definitely went down partly because of an ageing population, but its effects are clear."
"Indeed, despite the rapid fall in the unemployment rate, which reached a 6-year low of 6.1% in June, average hourly earnings did not accelerate at all. In June, they gained 0.2% over the month, i.e. +2% from a year earlier, incredibly stable over the last four years."
"Still, there are signs that optimism is allowed. The duration of unemployment episodes is going down. On average, they last 33.5 weeks in June, as compared with37.1 in February. This improvement is noticeable in broad measures of unemployment."
"As long as wage inflation remains that subdued and the labour force participation rate
does not go up again, there will be no reasons to call it a victory over mass unemployment."
building, although the level of underutilization of labor remains high.
Key quotes
"On a 3-month average basis, job creations reached 272k in June. On a year-on-year basis, payrolls growth is a notch below 2.5 million, i.e. the highest reading since the end of 2005."
"As we have argued for a long time, even if very strong over the last five months –and
longer, actually, if December 2013 and January 2014 are analysed as harsh winter related weakness –this pace is still insufficient for rapidly absorbing the very high level of under-utilised labour."
"What Janet Yellen recently called 'shadow unemployment' remains severely high. We can always argue about how to measure it, as the labour force participation rate definitely went down partly because of an ageing population, but its effects are clear."
"Indeed, despite the rapid fall in the unemployment rate, which reached a 6-year low of 6.1% in June, average hourly earnings did not accelerate at all. In June, they gained 0.2% over the month, i.e. +2% from a year earlier, incredibly stable over the last four years."
"Still, there are signs that optimism is allowed. The duration of unemployment episodes is going down. On average, they last 33.5 weeks in June, as compared with37.1 in February. This improvement is noticeable in broad measures of unemployment."
"As long as wage inflation remains that subdued and the labour force participation rate
does not go up again, there will be no reasons to call it a victory over mass unemployment."