October U.S. Employment, Vehicle Sales, ISM Manufacturing

Jobs Data Disconnect, Round 2: Payrolls Up, So Is Unemployment Rate to 7.9 Percent

  • The October Payroll Employment Survey showed a gain of 171,000 jobs, beating consensus expectations.
  • The Unemployment Rate for October increased to 7.9 percent as the labor force increased.
  • The Household Survey showed another large gain in employment in October, up by 410,000.
  • Light Vehicle Sales for October were dampened by Hurricane Sandy, falling to a 14.2 million unit rate.
  • The ISM Manufacturing Index for October improved, edging up to 51.7 percent.

The divergence between the payroll employment survey and the unemployment rate continued in October. The payroll survey added a moderate 171,000 jobs, beating consensus expectations and improving on the upwardly revised gain of 148,000 payroll jobs in September. Despite the improvement in the payroll numbers, the unemployment rate ticked up to 7.9 percent, reflecting a large gain in the civilian labor force. In September the unemployment rate fell significantly from 8.1 percent to 7.8 percent, despite then-reported soft payroll job gains. The September and October jobs data together show the danger of relying on month-to-month changes in the unemployment rate to gauge the strength of the economy.  The October jobs report will be viewed as a positive because it confirms that job creation has stepped up, at least temporarily, from the summer lull. Payroll gains were distributed across a broad range of industries. Manufacturing employment increased by 13,000 jobs after declining through August and September. Construction employment increased by 17,000 jobs, the biggest monthly increase since last January. Government employment declined by 13,000 after increasing for three consecutive months. The average workweek was unchanged at a moderate 34.4 hours for the fourth consecutive month. Average hourly earnings edged down slightly for the month. The combination of steady hours plus slightly lower average wages mutes the boost to income from the October job gains.  All in all, the October jobs report was better than September, but still remains consistent with an economy that is growing below potential.

Vehicle sales fell in October to a 14.2 million unit rate. It should be no surprise to see some giveback from September’s increase to a 14.9 million unit sales rate. Also, Hurricane Sandy disrupted the critical end-of-the-month sales period. The eventual completion of sales delayed by the storm plus the replacement of damaged vehicles will be a boost in coming months. The ISM Manufacturing Index for October increased slightly to 51.7 percent, indicating improving conditions for U.S. manufacturers. This was the second straight above-50 reading since the summer slump. Anecdotal comments were mixed, with most industries reporting concern about possible negative factors.

Market Reaction: U.S. equity markets opened with gains. Treasury bond yields are up. NYMEX crude is down to $86.66/barrel. The dollar is up versus the yen and the euro.

Click here for a PDF version of the Comerica Economic Alert: Employment 110212.

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