A glimpse of the light at the end of the tunnel

There have been a slew of reports that together indicate that the US economy is looking up, sparking a rebound on Wall Street. Companies increased hiring in the month of February, with the private sector adding 216,000 jobs against an expected 208,000 jobs according to the ADP National Employment Report. This means that after two years of expansions that was devoid of any increase in employment, businesses are finally at a point that they feel they need a larger workforce to meet an increase in orders.

The government is expected to release a more comprehensive report of the monthly labour market on Friday which will include numbers from both the private as well as public sector. Economists expect these numbers to show that 210,000 nonfarm jobs were added to the economy, with a gain of 225,000 jobs in the private sector offsetting a loss of jobs in the public sector.

Small business added the largest jobs to with 108,000, followed by medium sized businesses at 88,000 and small businesses at 20,000 jobs. Other data released on Wednesday indicated that salaries grew more than expected towards the end of 2011, driving consumer confidence. Unit labor costs rose at an annual rate of 2.8 percent in the last quarter of the year which is more than the expected 1.2 percent. Also hourly earnings, adjusted for inflation, rose at a 2.8 percent in the same quarter, up from the previously reported increase of 1.0 percent. This increase in wages may result in inflation which is a problem that the Federal Reserve needs to watch very closely. In additional to its inflationary effects an increase in labor costs could impact the balance sheets of businesses. The Labor department has revised its non-farm productivity growth figure to 0.9 percent pace form 0.7 percent Q4 2011.

House prices have dipped for a sixth month, falling by 1 percent in January with the sale of cheap distressed properties offsetting the modest 0.7 percent gains for newer homes in January. On the bright side though there has been an increase in the number of applications for new mortgages, while refinancing applications have not shown a similar increase. Also indicating increasing consumer confidence there has been an increase in applications for car and student loans.

Leave a Reply


Switch to our mobile site