11/7/2014
By Jennifer Coombs

There were a few takeaways from the Bureau of Labor Statistic’s report this morning: 1) payrolls increased but were well below expectations; 2) the unemployment rate ticked lower again; 3) wages remain soft; and 4) the data will cause the Federal Reserve to remain loose on economic policy. For the month of October, nonfarm payroll jobs increased by 214,000; following an increase of 256,000 jobs in September and 203,000 jobs in August. The median forecast among economists was for 240,000 jobs, so the actually number was well below expectations. However, the net revisions for both August and September were up 31,000 and this is a very positive sign. An additional sign of encouragement was the fact that the unemployment rate dipped to 5.8% in October from 5.9% in September as many economists expected the rate to remain unchanged. However, this isn’t too impressive considering that the workforce participation rate among U.S. adults declined slightly to 66.6%, from 67.2% in September effectively cutting the size of the labor market. The workforce participation rate has ranged narrowly between lows of 65.8% and highs of 68.5% since January 2010. However, since dropping below 67% in August 2013, workforce participation rate has primarily remained below that level ever since.

Back to the details of the report, private payrolls grew by 209,000 in October after a jump of 244,000 in September while analysts had projected an increase of 235,000. On the industrial side, goods-producing jobs increased by 28,000 for the month after a 36,000 gain the month before, and manufacturing employment increased 15,000 in October, following a rise of 9,000 in September. Also construction jobs advanced 12,000 after a gain of 19,000 in September, and mining edged up 1,000 in October, following an 8,000 rise in September. Private, service-providing jobs increased by 181,000 after a 208,000 increase in September, and strength again was seen in professional & business services and retail trade. Interestingly, the Challenger Job-Cut report released earlier this week contradicted this somewhat.

Average hourly earnings edged up 0.1% after no change in September, while economists forecasted a 0.2% gain. Average weekly hours ticked up to 34.6 hours versus 34.5 hours in September while projections were for 34.6 hours. The number of hours worked is steadily climbing to 40.0 hours, which would mean that the average worker has an average full-time job. This is also supported by the number of temporary jobs slowly dissolving over the last year as the chart below shows.

All-in-all, the labor market is improving, but the progress continues to be painfully slow. Unless the number of jobs consistently jumps higher and faster, we don’t expect the Federal Reserve to change their stance on interest rates.

Jennifer Coombs
Wall Street Strategies

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