The following is the complete text from a TD Economics Report dated November 2, 2012 regarding
The Employment Situation Report - October 2012 from the U.S. Department of Labor, Bureau of Labor Statistics. All statements below are from TD Economics.
Data Release: U.S. job growth accelerates in October to 171K. However, unemployment rises to 7.9% on rebounding labor force participation.
U.S. non-farm payrolls rose by 171K in October, well above the median consensus estimate of 125K. Private sector hiring expanded by 184K, also ahead of expectations for 123K. On the downside, after three months of increases, government payrolls resumed their decline in October, falling by 13K.
Revisions added an additional 84K to payrolls, with September’s previous reading of 114 jobs revised up to 148K. The revision to August was even better, from 142K to 192K.
Goods-producing employment rose by 21K supported by strong growth of 17K in construction employment and a 13K rise in manufacturing employment. Markets had been expecting a decline of 5K.
The unemployment rate ticked up to 7.9% from 7.8%. However, the details aren’t as bad as the headline. Household survey employment rose by 410K, but was outpaced by 578K growth in the labor force. The labor force participation rate rose to 63.8% from 63.6% a – its highest level since May.
Average hourly earnings were flat in the month, below expectations for a 0.2% gain. Average weekly hours also fell slightly to 34.4 from 34.5 in September.
Key Implications
Despite the rise in the unemployment rate, this is a very good report. The pace of payroll growth beat even the most optimistic analyst’s estimate and revisions show a much healthier pace of job growth over the past three months than previously reported. Having said that, today’s report was also a reminder that even with relatively strong job growth, improvements in the unemployment rate could be harder to attain, especially as labor force participation also rebounds.
Ignore the naysayers, the U.S. economy is showing incredible resilience in the face of significant challenges. Despite acute uncertainty over the fate of the fiscal cliff and a struggling global economy, America continues to generate jobs at a respectable pace. In fact, this report adds to a string of surprisingly good data from U.S. consumer spending, confidence, manufacturing and the housing market.
While analysts rightly focus on the downside to U.S. growth come the New Year, there is also an upside. If Congress can avoid the fiscal cliff, the prospects for job growth next year appear very good. With a housing market in repair, consumer confidence rising and credit growth improving, the stage should be set for jobs to take off. The fact that businesses are continuing to expand even with huge
fiscal uncertainty means that once this cloud lifts, the pace of job creation has lots of room to accelerate. Even with some fiscal drag next year, we expect job growth to exceed 200K a month by the second half of next year.
James Marple, Senior Economist
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