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U.S. Jobs Report – Something for Everyone

11/02/2012

For those expecting this morning’s U.S. jobs report to provide the markets with some form of clarity – you must be disappointed. The report contains both favorable and unfavorable conditions for bulls, bears, Republicans, and Democrats to digest.
 
My expectation that the market is in the midst of an “election correction” does not change based on the evidence presented in the report. My focus remains on Wednesday morning, November 7’s U.S. presidential election outcome and margin of victory. Portfolios should not be altered based on the labor report.
 
Additionally, investors must reassess the potential drag ‘Tsunami’ Sandy will have on holiday spending. The upcoming holiday season was expected to provide a tailwind for the market. It still may, however, but it must be monitored much more closely.
 
October U.S. Labor Report Highlights                                                             
 
•  Nonfarm Payrolls rose 171,000, better than the estimate of +125,000
•  Private Payrolls rose 184,000, better than the estimate of +123,000 (Figure 1.1)
•  The Unemployment Rate rose to 7.9% from 7.8% (Figure 1.2)
•  September’s Nonfarm Payrolls was revised higher from +114,000 to +148,000
•  September Private Payrolls was revised higher from +104,000 to +128,000
•  The Underemployment Rate declined to 14.6% from 14.7%
•  Average Hourly Earnings at +1.6%, year on year, was the weakest gain since 2007
•  Average Hourly Earnings, month on month, was flat at 0.0%; last month was 0.3%
•  Earnings for Production Workers rose 1.1%, the weakest reading for that measure since 1965
•  Household Employment rose 410,000 as the labor force expanded
 
Figure 1.1 U.S. Private Payrolls, Month on Month, December 31, 2011 – October 31, 2012

Source: Bloomberg
 
Figure 1.2 U.S. Unemployment Rate, January 1, 2009 – October 31, 2012

Source:  Bloomberg


Source: Bloomberg

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