the report

Last Friday at 8:30 est, the  Bureau of Labor Statistics of the Labor Department released its Employment Situation report for October 2013.

Given the general tone of deep discouragement about the economy-retarding actions of Washington–and the impending government shutdown, in particular–the ES figures were surprisingly, even shockingly, good.

The economy added 204,000 net hew jobs during the month.  The private sector accounted for +212,000, government lost -8,000.

In addition, revisions to the two prior months’ figures were also strongly positive.  August job gains, estimated last month at +193,000 were upped to +238,000.  The September figures, initially put at +148,000, were increased to +163,000.  Together, therefore, revisions added +60,000 to the +204,000 total for October–meaning employment in the US on Halloween was over a quarter-million positions higher than estimated a month earlier.

One more positive:  economists, who had called the October ES figure at +130,000 new jobs, also estimated that the impending government shutdown depressed job creation by another +50,000.

There’s only one month since employment turned up in October 2010 where job gains are clearly on a par with, or better than, this October.  That was January 2012, where the final job tally was a gain of +311,000.

what this means

On the surface, the figures appear to be some sort of weird outlier.  If employment gains should be weak during any month, this October should have been it.  And that’s the way I perceive Wall Street to be taking the Employment Situation  report.

Suppose it’s not   …that the economy actually gained about +300,000 new jobs last month and will continue to do so.  This would mean that the US has shifted from creating just about enough new positions (+150,000 or so) to absorb new entrants to the workforce to creating around +150,000 a month more than that.   This would be enough to bring the economy back to full employment–reabsorbing the country’s 3 million long-term unemployed into the workforce in less than two years.

Hard to believe.

If it were so, that would mean that the “normalization” of interest rates–that is, bringing short-term rates from the present zero to 3%+–could/should proceed much more quickly than anyone now expects.

In some ways, that would turn my current idea for portfolio construction on its head.  In particular, it would imply a stronger dollar (therefore a weaker euro) and a preference for purely domestic US companies, not international earners.

I’m not making any changes yet.  I’d like to see next month’s ES first.  But I am putting the search for domestic-oriented EU names on the back burner.