Employment improving but consumer borrowing fell in Nov

The US Labor Department has reported that nonfarm payroll employment increased by 157,000 in December while the unemployment rate was unchanged at 5.4 percent.

Together with upward revisions in employment numbers for October and November, this helped boost the 2004 new jobs total to 2.2 million, the largest since 3.2 million were created in 1999 and a reversal from the 61,000 jobs lost in 2003. While the number of jobs created is not as high as in previous economic recoveries, it should be strong enough to keep the Federal Reserve on its tightening stance.

Speaking of the Fed, yesterday, it reported that consumers cut back on their borrowing in November by the largest amount on record. Consumer credit reportedly dropped by US$8.7 billion in November from the previous month, a 5 percent decline at a seasonally adjusted annual rate. The last time consumers trimmed their borrowing was in November 2003.

This may be a sign that monetary tightening is beginning to bite. Or that consumers are feeling their debt burden. Or it could be just a temporary blip, possibly due to consumers awaiting holiday discounts, as some economists seem to think.

In any case, with consumer spending -- much of it on credit -- so important to the US economy, the trend certainly bears watching.