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Is employment improving or getting worse?

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Like everything related to economics, it depends who you ask. One Deutsche Bank economist sees positive signs ahead but a Merrill Lynch economist sees the unemployment rate increasing again soon. I fall into the "skeptical and see more tough times ahead" camp. If we managed to even break even with the 150,000 monthly new jobs needed in the next few years I would be pleasantly surprised. A few of the weaknesses listed by Merrill Lynch include:

1) The payroll diffusion index fell from 59.6 to 54.7 from October to November. Diffusion indices are simple counts of who’s adding jobs and who’s not. For instance, if five companies are polled and three say they are adding jobs, the diffusion index would be 60. The drop “implies that the breadth of hiring is weakening; there are not as many industries adding jobs,” Dutta said.

2) Average hourly earnings fell 0.1 percent and are up just 1.9 percent from 2010, meaning there “has been almost zero movement in the rate of wage growth,” he said.

3) Those “not in the labor force” jumped by 487,000, including 338,000 who either lost their jobs or just quit looking.
Barring a major collapse in Europe, things may not get dramatically worse, but there's little that suggests it will get much better.

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