Unemployment rate on hold
The BLS has reported its October job numbers this morning.
The good news:
- Private firms are hiring faster than expected. This month 159,000 new private-sector jobs were added. Early this week economists were estimating an increase of only 20,000 private sector jobs. A Wednesday report from paycheck and payroll services firm, Automatic Data Processing, estimated an increase of only 43,000. This beats all those numbers.
- Retail firms added 24,000 workers even after adjusting for the usual winter shopper increase. This is sign that they expect consumer spending to be relatively strong.
- August was revised up from a loss of 57,000 jobs to flat. September was revised up from a loss of 95,000 jobs to a loss of only 41,000.
The bad news
- Manufacturing registered a slight loss of 7,000 jobs and has been essentially flat for months
- The unemployment rate held steady at 9.6 percent. This might strike you as a neutral finding, but the longer unemployment is elevated, the harder it will be to bring down.
From a strictly number point of view, the good outweighs the bad here. The economy is not quite producing jobs at the rate it needs to, to keep up with population growth. However, the report is much stronger than expected.
Also important is that previous job estimates were strongly revised up. The BLS employment numbers are based on surveying 300,000 businesses. Unsurprisingly not everyone responds to the survey on time. So, the BLS must estimate what they would have said if they had turned in their form. However, in later months additional data come in that allows us to correct those original estimates. Those data are also coming in stronger than expected, and this is why all the revisions have been good news.
Fed watchers might be a little concerned; however, the timing of this report might make some members of the FOMC nervous as they have just announced QE2 on the premise that the economy was headed in the wrong direction.
Karl Smith is an assistant professor of economics and government at the University of North Carolina and a blogger at ModeledBehavior.com.
| November 5, 2010; 11:30 AM ET
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