Friday, November 2, 2007

Jobs Up +166,000

From the BLS:

Total nonfarm payroll employment rose by 166,000 in October to 138.4 million, following increases of 93,000 in August and 96,000 in September. In October, job growth continued in several service-providing industries, while employment in manufacturing continued to trend downward. Construction employment was little changed over the month.

Let's go back to the latest GDP report which had growth at 3.9% with an unbelievably low inflation level (.8%). Now, lets' approach the employment report from two angles.

1.) Let's assume the GDP report was correct and the inflation number was accurate. Then this number makes sense. With an economy growing at 3.9% you're going to see more job growth. It's that simple.

2.) Let's assume the GDP report was too high, largely because the inflation number was too low. Then this report is bit harder to swallow but it doesn't strain credulity. Let's assume that inflation is restated and takes the GDP report down to 2.5% -- which is a pretty large whack. Even at 2.6%, 166,000 isn't that hard to believe. While 2.5% isn't great, it's still growth and that means businesses will need more people to do stuff. In addition, employment figures have been low for the last three months indicating businesses may have been holding off on hiring and now have to hire because they have their "backs to the wall" as it were.

In short, given the latest GDP number this report isn't out of line with the current environment.