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Enjoy the cheery U.S. jobs news while it lasts

Enjoy the rosier U.S. jobs figures while they last. The 146,000 new positions added in November were more than expected while the 7.7 per cent unemployment rate is the lowest level since December, 2008. But the labour force participation rate also sank to a 30-year low and fiscal austerity, cliff-driven or otherwise, looms. That portends a work force reversal of fortune.

The latest report defied forecasts mainly because Hurricane Sandy turned out to have been less of a factor on employment than economists feared. And while job creation for September and October was revised downward by a total of 49,000, the decline was entirely accounted for by an unexpected drop in October government employment. Private-sector job creation remained encouragingly healthier.

Beyond the headlines, though, are bleaker signs. The proportion of Americans working fell by 0.2 percentage point to 63.6 per cent. The rate, which has been sliding since the onset of the financial crisis, is also the lowest since the end of 1981. If labour participation had remained at its 1990-2007 average of 66.5 per cent, the current unemployment rate would be closer to 12 per cent. Moreover, the fall is greatest among the young. Among 20- to 24-year-olds, for example, employment is 2.9 per cent lower over five years compared with an 18.6-per-cent rise for those older than 55. This demographic shift doesn't augur well for U.S. joblessness.

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There will also be significant fiscal matters with which to cope. According to the Congressional Budget Office projections, going over the so-called "fiscal cliff" would cost 3.4 million jobs by the fourth quarter of 2013, thus pushing the unemployment rate over 9 per cent. That estimate also overlooks the capital markets effects on jobs from slashing $500-billion from the budget. And even if President Barack Obama and congressional leaders can achieve some sort of compromise, eliminating the 2001-2003 tax cuts for incomes above $250,000 alone would dent employment to the estimated tune of 1.1 million jobs.

It's nice to have a modicum of Christmas cheer when it comes to U.S. employment. Just be ready for the New Year's hangover.

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