The key event of the week was in Europe when ECB President Mario Draghi announced the Outright Monetary Transactions (OMT). It is hard to tell how effective these measures will be, although analysts at Nomura think the OMT bought policymakers three months at best: "This latest round of policy announcements could buy up to three months should countries call for help relatively quickly and conditions attached to the bail outs are light."
In the US, it was a busy week. The employment report was weak again with only 96,000 payroll jobs added in August, and the ISM manufacturing index suggested contraction in manufacturing for the fourth consecutive month.
Other data was a little better - vehicle sales in August were at 14.5 million SAAR, the ISM services index was above expectation, and initial weekly unemployment claims declined more than expected.
But the key report was employment, and payroll job growth remains sluggish.
Here is a summary of last week in graphs:
' August Employment Report: 96,000 Jobs, 8.1% Unemployment Rate
There were 96,000 payroll jobs added in August, with 103,000 private sector jobs added, and 7,000 government jobs lost. The unemployment rate decreased to 8.1% (from the household survey), and the participation rate declined to 63.5%. The decline in the unemployment rate was mostly due to the lower participation rate.
U-6, an alternate measure of labor underutilization that includes part time workers and marginally attached workers, declined to 14.7%.
The change in payroll employment for July was revised down from +163,000 to +141,000, and June was revised down from +64,000 to +45,000, for a total revision of minus 41,000 over those two months.
This was below expectations of 125,000 payroll jobs added.
The second graph shows the employment population ratio, the participation rate, and the unemployment rate. The unemployment rate decreased to 8.1% (red line).
The Labor Force Participation Rate declined to 63.5% in August (blue line)- another new cycle low. This is the percentage of the working age population in the labor force.
The participation rate is well below the 66% to 67% rate that was normal over the last 20 years, although most of the recent decline is due to demographics.
The Employment-Population ratio declined to 58.3% in August (black line). This is a new low for the year, and just above the cycle low.
The third graph shows the job losses from the start of the employment recession, in percentage terms. The dotted line is ex-Census hiring.
The economy has added 1.11 million jobs over the first eight months of the year (1.21 million private sector jobs). At this pace, the economy would add around 1.8 million private sector jobs in 2012; less than the 2.1 million added in 2011. Also, at this pace of payroll job growth, the unemployment rate will probably still be above 8% at the end of the year.
This was another weak employment report, especially with the downward revisions and slight decline in hourly earnings.
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