since last year employment went up 4 million and the population only went up 2 million. Stock index futures liked it...
Stone McCarthy’s First Take:
Nonfarm payrolls rose 214,000 in October. Private payrolls rose 209,000 in the month, and government jobs were up 5,000. There was a revision in September to 256,000 (previously 248,000) and August was revised to 203,000 (previously 180,000). The combined rise for October payrolls and an upward revision of 31,000 to the prior two months nets out to a gain close to market expectations. A glance at the October headline might be initially disappointing, but most of the data in the report remains consistent with a sustained improvement in the labor market. In particular, the one-tenth drop in the unemployment rate to 5.8%, and one-tenth uptick in the participation rate to 62.8 add an encouraging tone to the numbers.
Our forecast was for nonfarm payrolls to rise by 250,000 in October, and was above the median in the Bloomberg survey of up 235,000. The range was from up 140,000 to up 314,000.
For the third quarter, payroll increases were up 234,000 a month compared to an average of 267,000 a month for the second quarter. October’s 214,000 sets a somewhat slower pace at the start of the fourth quarter, but is still on track for moderate gains in payrolls. The six-month moving average in October was at 235,000 per month.
FOMC participants will have another month to consider these numbers before the December 16-17 meeting, as well as the November employment report set for release on Friday, December 8. We think policymakers will keep to the same sort of assessment of an improved labor market while remaining cautious and patient in regard to reducing policy accommodation.
Service-providers had a 181,000 increase in payrolls in October, while goods producers saw an increase of 28,000. Among goods-producers, construction was up 12,000, and manufacturing was up 15,000. Among service-providers, there was a solid gain for professional and business services of up 37,000, of which 15,000 was due to temporary help. Retail trade gained 27,000 and trade and transportation was up 49,000. Altogether, these show respectable gains for payrolls.
Average hourly earnings were up 0.1% at $24.57 in October from $24.54 in September. The workweek was up one-tenth to 34.6. These are modest increases, but moving in the right direction.
The index of aggregate weekly payrolls rose 0.6% to 119.4, after an up 0.2% reading in September and up 0.5% in August. We view this index as a measure of the quality of employment. The underlying trend remains one of moderate gains for the past ten months.
The unemployment rate declined one-tenth to 5.8% in October from September. The unrounded unemployment rate was 5.756%, down from the 5.942% in the prior month. This is a notable decline. Bloomberg survey expectations centered at 5.9% within a range of 5.8% to 6.1%. Our forecast was for 5.9%. The participation rate was up one-tenth to 62.8%. While it has been little changed over the past seven months, a hint of firmer participation is welcome. More interesting, the number of workers unemployment for 27 weeks or more fell to 2.916 million in October, down from 2.954 million in September, and the remained below the 3-million mark for a third month for the first time since February 2009. The number of workers employed part-time for economic reasons fell to 7.027 million in October from 7.103 million in the prior month, continuing its march lower.
On the whole, the FOMC will find these data encouraging for the removal of slack from the labor market, although still at high levels for the un- and underemployed.