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September Nonfarm Payroll Report

10/23/2013

Thanks to the D.C. dysfunction, the September nonfarm payroll report was released 18 days later than expected.  Accordingly, the October report has been pushed back one week from Friday, November 1, to Friday, November 8.

Let’s take a look at the September report…

  • September nonfarm payrolls rose 148,000, below consensus estimates of +180,000
    • August nonfarm payrolls were revised higher to +193,000 from a previously reported +169,000
  • September private payrolls rose 126,000, below consensus estimates of +180,000
    • August private payrolls were revised higher to +161,000 from a previously reported +152,000
  • The September unemployment rate (Figure 1) fell to 7.2% from August’s 7.3%
  • The labor force participation rate (Figure 2) was unchanged at 63.2%
  • The underemployment rate fell in September to 13.6% from August’s 13.7%
  • September manufacturing jobs rose 2,000, below consensus estimates of +5,000
    • August manufacturing jobs were revised lowered to +13,000 from a previously reported +14,000
  • Average weekly hours worked were unchanged at 34.5
  • Average hourly earnings year-on-year rose 2.1%, below August’s revised higher 2.3% from 2.2% previously
  • Average hourly earnings month-on-month rose +0.1%, below August’s revised higher +0.3% from +0.2% previously

COMMENTARY

In the wake of the payroll report, the S&P 500® Index (SPX) (Figure 3) traded to another new all-time high of 1759.33, and the yield on the U.S. 10-year Treasury (Figure 4) fell to 2.5106%. The D.C. dysfunction and tepid jobs report are evidence that the FOMC’s ability to taper its monthly asset purchase program will be pushed back to the March 18-19, 2014 meeting at the earliest.

Besides the September payroll report, construction spending (Figure 5) for August was also reported this morning, coming in at +0.6% month-on-month. That figure was better than the consensus estimate of +0.4%. July’s previously reported +0.6% was also revised higher to +1.4%.

So while secular challenges remain for domestic labor conditions, other metrics of the economy continue to suggest acceleration in U.S. growth over the coming months.

Lastly, 131 SPX companies have now reported earnings. Overall SPX sales growth is tracking at +2.16% and overall SPX EPS growth is tracking at +5.54%.

Figure 1 U.S. Unemployment Rate, 2008 to Present
10-23 Terranova 1.1
Source: Bloomberg

Figure 2 U.S. Labor Force Participation Rate, 2007 to Present
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Source: Bloomberg

Figure 3 S&P 500 Index (SPX), Prior 365 Days
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Source: Bloomberg

Figure 4 U.S. 10-Year Treasury Yield, Prior 365 Days
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Source: Bloomberg

Figure 5 U.S. Total Construction Spending, Prior 365 Days
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Source: Bloomberg

Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.