US: Remarkably employed

Policymakers in the US must be smiling ear to ear over the past couple of days. After all, their efforts seem to be paying off.
A few weeks after the US Fed announced a quantitative easing programme of pumping $600 billion into the economy and a continuation of tax-cuts in the economy, US private sector jobs data showed a remarkable rebound, indicating improving business activity
Payrolls among private employers rose by 297,000, according to payroll processor ADP - the biggest gain since the report was first issued in 2000. This was much higher than economists expectations of a rise of 100,000 jobs.
The ADP report comes two days before the US governments monthly employment data, which is due today. Economists believe the improved numbers will be reflected in the labour data to be revealed today. Jonathan Basile, director of economics at Credit Suisse, commented on the strong business activity, saying that it "should translate into some sharing of that revenue with the labour side of the economy."
The unemployment rate is expected to be down to around 9.7 percent from 9.8 percent when the US labour data will be released.
The optimistic result had a spill-over effect on other areas of the US and global economy. The signs of an improving economy weakened demand for low-risk investments, driving down prices of 10-year Treasury bills, and hence pumping up yields. This drove up dollar demand, driving up the greenbacks value.
The dollar index, which measures the greenbacks value against a basket of major currencies, stood firm at 80.27 USD, a sharp turnaround from last weeks trough of 78.78. Oil prices also rallied to above $90 per barrel on Wednesday.
It looks like the US economy is entering the New Year on a very positive note. While the pace of recovery has been slow, it has definitely been steady. The improvement in job numbers was led by the services sector, which accounts for a major part of US economic activity.
The unemployment rate continues to be a big challenge for the US economy, and the government is likely to continue with the easing policies until a desirable level of unemployment is reached.
Official labour data will reveal the extent of growth in employment at the end of 2010 when it will be revealed later today. So far, a positive sentiment has been built up about it. One hopes the optimism stays alight even after it is disclosed.