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All eyes on U.S. jobs report after discouraging GDP data

Job seekers stand in line to meet with prospective employers at a career fair in New York City, October 24, 2012.


With last week's news that first quarter U.S. GDP declined a surprising 2.9 per cent, economists are looking to Thursday's jobs data to provide an indicator of economic stability.

Issued by the U.S. Bureau of Labor Statistics, the much-watched monthly report has generated consistently positive numbers since 2010. There have been 44 consecutive months of positive jobs growth, and the unemployment rate has declined from 10.2 per cent in October, 2009, to 6.3 per cent in May. The preliminary May data indicated that 217,000 jobs were added, bringing the unemployment rate to its lowest level since the financial crisis began in September, 2008.

Economists surveyed by Bloomberg expect the unemployment rate to hold steady at 6.3 per cent, and for 208,000 jobs to be added. The six-month average for jobs growth is 192,000.

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University of Chicago economist Allen Sanderson expects more of the same when Thursday's jobs data are released, "I would assume the jobs data would be similar to May," he said, expecting around 200,000. "It's pretty clear that the U.S. economy has reached a trough some time in the past and it's recovering slowly," adding that he expects the jobs data to be stable until the U.S. elections in November.

James Marple, an economist at Toronto-Dominion Bank, agrees with Sanderson's assessment that observers should expect similar numbers to May, and adds that it would be a welcome contra-indicator to the negative GDP data. "We've seen a bit of disappointment in economic growth in the first half of the year," said Mr. Marple, referring to the record decline that is largely believed to have been caused by bad weather. "The strongest case we have against the GDP numbers is the ongoing jobs data."

Mr. Marple added that while he's looking for 200,000-plus jobs to be added, anything above 225,000 could boost investor confidence, "Analysts are looking for a sign that this slow, meandering recovery that has been the state for the past three to four years, that we're going to break out of it."

If that's the case, Mr. Marple expects a selloff of the Canadian dollar, which he expected to depreciate relative to the U.S. dollar at the start of the year. Strong jobs data would also give some needed breathing room to central bankers, "It would be good for monetary policy if we see inflation moving up," said Mr. Marple.

One additional indicator to look out for is the participation rate, which is the per cent of the labour force that is employed or actively looking for work. May's data had the lowest participation rate in 36 years, an ongoing trend caused in part by an aging population.

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