In the last week of January, 2010 the U.S released the figures of GDP growth rate of 5.75% - a sign of growth for the second quarter on the trot. However it appears that this growth is yet to do any benefit to the jobless category of people in the U.S. For January alone – over 20500 people lost their jobs. Over 14500 jobs are expected to be created. Despite decrease in unemployment rate from 10 percent to 9.72 percent, more than 1.5 crore U.S. citizens are without job. In short, the U.S. is experiencing statistical growth coupled with recession in human capital.

The month of January continued to witness positive trends as of previous month. More than 50000 workers on temporary employment were added and working hours were added. Professional services, education, health and retail sectors witnessed an increase of over 40000 jobs after having seen a decline in the last month of 2009. Jobs in manufacturing sector were up by over 11,500 – first increase since the start of global meltdown.

Despite the gain this release is seen as a disappointing figure. The employment data published by the Labor Department showed a loss of over 900,000 more jobs than the estimated figure during April 2008 to March 2009. First two quarters of 2009 witnessed loss of over 140,000 jobs. This showed the worse performance of job market. Subsequently, the figures of the last quarter of 2009 were revised in a bid to show job-increase in November but bigger decline in December. This resulted in a net drop of 5000 jobs with respect to previous reports. Despite the growth in E-P (Employment-Population) ratio from December 2009 to January 2010, the long-term unemployment problem is expected to continue. Over 63 lakhs jobless workers, which constitutes over 40% of the total unemployed workers (1.5 crores), are out of work for over 6 months.

The economic recovery has so far failed to benefit the labor intensive market. Even the robust growth in GDP could not prevent the loss of over 300,000 jobs during the last quarter of 2009. First three months of 2010 is not expected to depict significant growth, resulting in a lower rate of improvement in employment.

The Senate would face the enormous pressure owing to January reports on employment. To boost up the hiring, the House of Representatives passed $150 billion measure in the last month of 2009. Several policies were announced by Barak Obama to increase hiring. Tax credit worth $33 billion was offered to companies that would increase either of employees, wages or hours. This may prompt companies to respond relatively. In the wake of increased output by businesses and lean payrolls, the labor productivity increased by over 6% during the last quarter of 2009.

However, the lower than expected results of labor markets coupled with strong indications of jobless recovery would delay the economy boost. A longer wait to steady employment creation would result into uncertain recovery.

Nishant Gaurav

Religare Securities Ltd.

Reach on: nishant.gaurav@religare.in