Fears of a double-dip recession in the United States began last spring and strengthened into the summer. New job data sagged, confidence worsened, and production fell. It could have emanated from the Arab Spring, or perhaps it was the earthquake in Japan. It might have been the anticipation that the Federal Reserve would cease further intervention, or maybe it was the Congressional clash over the debt ceiling. Whatever it was, it didn’t stop the US economy from creating new jobs.
The nonfarm payroll data is released monthly and is the most closely watched employment figure by all market participants. As the name suggests, all US jobs are included in the figure with the exception of the farming sector. The report showed that the private sector added 104,000 jobs between September and October 2011. Because the US government cut 24,000 jobs (20,000 state, 2,000 federal, 2,000 municipal), the total nonfarm payroll job creation last month was 80,000. This brings the number of US workers up to 131.516M from 131.436M the month earlier. While this is 1.2% higher than last October 2010, an additional 5.845M new jobs will need to be created in order to reduce today’s 9.0% unemployment figure to a more natural 6.0%.
Several glimmers of hope were offered in the report. Coupled together, these observations bode well for an economic recovery and future stock market appreciation.
First, economists have underestimated the number of new jobs created in recent months. While the estimate was that the economy created 60,000 and 65,000 new jobs in August and September respectively, the economy nevertheless added 103,000 and 158,000 new jobs in each of those two months.
Second, the US Bureau of Labour Statistics (BLS) revised their reported figures for nonfarm payrolls upwards for both August and September. The BLS originally reported that 0 jobs were added in August but then revised this figure up to 103,000. Interestingly, the S&P 500 index fell 2.5% the day 0 jobs were reportedly added because economists expected a 60,000 job gain. Nevertheless, despite the positive revision to 102,000, the market showed no remorse. It fell another 0.8% that day too. In September, the BLS originally reported that 103,000 jobs were added but then also revised that number upwards to 158,000. Revisions are always made each month. Because the prior month’s job gains are reported on the first Friday of the following month, data is still fresh and not yet precise. The BLS requires more time to finalize the numbers.
Third, the BLS also revised upward their original private sector payroll job gains for June, July, August, and September. Each initial number reported was revised upwards by, on average, 26,000 new jobs for each of those four months.
Given these positive restatements, market participants will watch closely for any October revisions on December 2nd when the next nonfarm payrolls figure is released. Because the average nonfarm payroll revision has been a difference of almost 84,000 jobs from the initial number reported, the market cannot place much emphasis on the October employment situation until the revision is made known in four weeks. Nevertheless, it appears that the economic recovery — albeit slow — remains on track. New jobs have emerged this summer at a faster rate than many experts originally thought.
