Employment and Unemployment Up? Interpreting the NFPs

A few minutes ago, NFPs came out much higher than expected, at 312k compared to an expectation of 177k. At the same time the unemployment rate is up to 3.9%, compared to 3.7% last month.

While the two may appear contradictory remember that the employed and the unemployed are not a closed system. People can enter and exit the employment/unemployment pool but can still remain in the labour force, if they are, for example, disgruntled by not finding a job, wish to spend more time with their children, or want to wait for a better wage rate and employment conditions before re-entering the job market.

This is what has happened in the US according to the latest data release, as the participation rate, i.e. the percentage of people in the employment/unemployment pool as a percentage of the labour force has increased to 63.1%, compared to 62.9% last month.

Overall, this is a positive note for the US economy, given that it means more people see that the current job market is providing them with good incentives to work. This would only happen if workers have a positive outlook of the overall market and the economic outlook of the country. While it could likely be a one-off, especially given that it took place over the holiday season and the fact that the majority of jobs gains was from the service sector (notably health care, leisure activities, professional and business services, and retail trade) a continuation of this result would provide further support for a positive US economic outlook in 2019.

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Dr Nektarios Michail

Market Analyst


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