October Jobs report: blowout raises odds of December Fed action

- by New Deal democrat

HEADLINES:

• 271,000 jobs added to the economy
• U3 unemployment rate down -0.1% to 5.0% 

With the expansion firmly established, the focus has shifted to wages and the chronic heightened unemployment.  Here's the headlines on those:

Wages and participation rates

• Not in Labor Force, but Want a Job Now: up 97,000 from 5.935 million to 6.052 million
• Part time for economic reasons: down  -269,000 from 6.036 million to 5.767 million
• Employment/population ratio ages 25-54: unchanged at 77.2% 
• Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.09 from $21.09 to $21.18,  up +2.2%YoY. (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)

August was revised upward by 17,000.  September was revised downward by -5,000, for a net change of +12,000.

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mainly positive.

• the average manufacturing workweek rose +0.1 hours from 41.6 hours to 41.7 hours.  This is one of the 10 components of the LEI and so will affect it positively.
 
• construction jobs increased.by 31,000.  YoY construction jobs are up 233,,000.  
 
• manufacturing jobs were unchanged, and are up 80,000 YoY.

• Professional and business employment (generally higher-paying jobs) increased by 78,000 and are up 664,000 YoY.


• temporary jobs - a leading indicator for jobs overall increased by 24,500.


• the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - fell by -37,000 from 2,363,000 to 2.326,000.  The post-recession low was set 2 months ago at 2,095,000.

Other important coincident indicators help us paint a more complete picture of the present:

• Overtime rose 0.2 hours from 3.1 hours to 3.3 hours.


• the index of aggregate hours worked in the economy rose by 0.3% from  103.8 to 104.1. 
 
• The broad U-6 unemployment rate, that includes discouraged workers fell  by  0.2% from 10.0% to 9.8%. 

•  the index of aggregate payrolls rose by 0.6% from 124.3  to 125.2.

Other news included:      

• the alternate jobs number contained in the more volatile household survey increased by  320,000 jobs.  This represents an in crease of 1,860,000  jobs YoY vs. 2,814,000 in the establishment survey.  


• G overnment jobs rose by 3,000.  

• the overall employment  to population ratio for all ages 16 and above rose 0.1%  from 59.2% to 59.3%, and has risen by 0.1%  YoY. The labor force participation rate was unchanged at   62.4% and is down -0.4% YoY (remember, this incl udes droves of retiring Boomers). 

SUMMARY: 

This was obviously a very strong reoprt, which if duplicated next month strongly implies the Fed will raise rates.  There were only a few negatives, including stalled labor force participation, the relatively poor household increase YoY,  and the increase inthose who are out of the labor force but want a job.

Everything else - the unemployment rate, YoY wage growth, the decline in those working part-time for economic reasons, and even manufacturing hours, was positive to strongly positive.

I am particularly heartened by signs that wage growth may finally be improving, in keeping with the thesis that it would do so once the U-6 rate fell under 10%.  With nonexistent inflation, it would be nice if the Fed would give labor a break.