At 8:30 am Eastern time this morning, the Bureau of Labor Statistics of the Labor Department released its monthly Employment Situation for October. The report contains surprisingly good news, on two fronts:
–the Establishment Survey
This survey is wider-reaching and generally considered more reliable. It’s the one usually referred to when talking about employment in the US (see my post on the ES from last month for more details).
This month’s report shows that the economy added 171,000 new jobs, about 50,000 more than consensus expectations. That’s comprised of +184,000 in the private sector and -13,000 in the government.
In addition, the August payroll numbers were revised up by +50,000 to +192,000. September figures were also raised by +38,000 to +148,000.
In total, then, the number of people employed in the US economy is about a quarter-million higher than we thought a month ago.
–the Household Survey
The unemployment rate figures aren’t derived from the Establishment survey. Instead, they come from a systematic set of telephone interviews done for the Labor Department by the Census Bureau called the Household Survey. Last month’s HS was controversial because it showed a sharp drop in the unemployment rate to below 8%. This result was the combination of two bullish factors: the workforce rose by +418,000 (meaning a lot of people became enthused about finding new jobs–a typical phenomenon as an upcycle starts), and +873,000 people actually found work. True, the bulk of that was part-time, but still a very positive development.
Democrats proclaimed this was the first sign that their policies were working; Republicans–including Jack Welch, the Paris Hilton of former big company CEO’s–claimed the administration was cooking the books. My own thought was that this was an anomaly that would likely be reversed in the October data.
Not so, however.
The October Household Survey results are similar in direction, though not as strong in scope, as those of September. Based on the Census Bureau interviews, the Labor Department estimates that another +578,000 people entered the workforce last month and that +410,000 found jobs. The difference–168,000–was enough to cause the unemployment rate to tick up from 7.8% to 7.9%. But, as I mentioned before, this is what usually happens in a job upturn.
Although the initial Wall Street reaction I see as I’m writing this can scarcely be considered enthusiastic, the ES report seems to me to be very good news for the US economy. The disconnect is likely due to the fact that the bullishness of the ES hasn’t been reflected so far in the 3Q12 earnings reports from publicly traded companies.
This is partly due to the fact that some of the corporate weakness we’re seeing comes from companies’ international operations. Pry may also be, in effect, the inverse of what we were seeing a few years ago. At that time, strong retail results reflected continuing spending by the wealthy, while average Americans were still watching their pennies. Maybe now we’re seeing the spread of recovery to workers who patronize Wal-Mart and Home Depot, not Tiffany and Coach. It may take careful stock selection to benefit from the employment trend that may be developing.
On the other hand, the Wall Street reaction may simply be that traders in New York are more preoccupied with Hurricane Sandy’s damage to their homes and towns.