SG: Eco Analysis - US Employment Report: Don't be misled by the October prints (B. Jones)

Eco Analysis - US Employment Report: Don't be misled by the October prints (B. Jones)
2011.11.04 06:34 AM

■ October job gains failed to match our forecasts, but revisions placed levels even higher

The Bureau of Labor Statistics (BLS) reported that nonfarm payrolls climbed by 80K in October, or by 104K after adjusting for continued pink-slipping by governmental entities. While last month's payroll gains failed to meet our and the Street's expectations, significant upward revisions to the previously reported figures for August and September actually left the October tallies well above projected levels. August was almost doubled from 57K to 104K, while another 55K jobs were added to the original 103K September estimate. It is worth nothing that this is the second consecutive report that saw the BLS' prior projections boosted about roughly 100K jobs.

■ Echoing ADP canvass, service-producing firms continue to drive the hiring bus

The entire increase in private sector jobs was attributable to a 114K expansion of service-producing payrolls. With the exception of the information industry (-5K), all service-producing segments reported increased hiring in October. Trade and transport industries added 35K employees, with roughly half attributable to steeped-up retail hiring (+18K). Financial payrolls continued their saw-toothed pattern, adding 4K jobs and reversing all but a fraction of the September decline (-5K). Business services (+32K), education (+28K) and leisure and hospitality (+22K) posted solid job gains last month. As would be expected, the additional new-found juice in the August and September prints were attributable to higher service-producing estimates. An almost-complete reversal of the 27K construction job gain posted in September left the goods-producing job count 10K lower last month.

■ Despite slowdown in net job creation, the breadth of hiring improved in October

Diffusion indexes which measure hiring in the past and latest three months improved in October. The one-month diffusion index climbed by four percentage points to a three-month high of 60.7%, while the three-month gauge rose by one-half percentage point to 61.2%. The six-month barometer retreated by a little over four percentage points to 61.4%. The key takeaway here was that all remained well above the critical 50-point mark associated with unchanged job gains across industries.

■ Earnings and hours worked figures were in line with forecasts

Average hourly earnings climbed by 0.2% to $23.19 in October, after an upward-revised 0.3% advance in September. The latest reading placed this nominal compensation gauge 1.8% above its year-ago level. The average workweek of all private employees remains at 34.3 hours during the reference period, but the 104K rise in private jobs propelled the index of aggregate weekly hour 0.1% higher. The October reading on total hours worked stood 1.6% annualized above the Q3 average, suggesting that productivity growth in the nonfarm business sector likely will slow during the final stanza of 2011.

■ Employment is motoring in the household survey

Turning to the BLS' canvass of households, the civilian unemployment rate shed one tick to 9.0% the first decline in joblessness since July. An estimated 181K persons entered the labour force in October, while an even-larger number (277K) found work. Together with hikes of 331K in August and 398K in September, the 1.0 million increase in household employment over the latest three month more than offset the 483K decline posted over the June-July span. The U-6 unemployment measure that adds marginally attached workers and those working part time for economic reasons retreated by three ticks to 16.2% in October, completely reversing the reported September rise.