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he US Labor Department October jobs report on Friday reported a higher than expected 128k v 85k non farm payroll additions.  The US lost 36,000 manufacturing jobs. Unemployment stayed stayed at 3.5% the lowest since December 1969.

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October 2019 U.S. Employment Report

The Fed Chair Powell came out with a more dovish tone as expected at the last FOMC cutting rates following market fatigue from the trade wars and the resultant uncertainty. There has been an ongoing campaign by US Presdent Trump calling for lower rates and criticising the Federal Reserve for raising in the past year.  Federal Reserve President Powell and other Fed Governors have admitted they are unsure of the path for wages and inflation. In February American wages hit their highest levels in a decade at 3.4%, but has fallen back to 2.9% in October.

The market expected the October report released Friday to see nonfarm payrolls rise in line with longer-run trends in monthly employment growth at a consensus of  85,000 new jobs, impacted by the GM strike. Last month it came in  lower but revised higher at 180,000. Logic suggests a return to the mean after the volatility in the hiring data. The wages data gives us indications of the FOMC plans on rates into 2019 and 2020. Unemployment is near a 49 year low with higher participation and the two month NFP revision was +95,000 change to jobs last month.

However, the combination of weaker PMI readings and skill shortages amid a low unemployment rate of 3.7% pose downside risks. More important could be the earnings data, which missed expectations in April and May. Any further cooling of pay growth would raise the odds of the FOMC’s next policy change being a rate cut.

US Jobs Oct 2019


Employment:

  • Non-farm payrolls +128k vs +85K expected, Prior 180K (revised from 136 K)
  • Unemployment rate 3.6% vs 3.6% expected/prior
  • Participation rate 63.3% vs 63.1% expected.prior (63.2% highest since 2014)
  • Underemployment rate 7.0% vs 6.9 % prior
  • Two month net revision +95k vs Prior +45K
  • Manufacturing payrolls -36k vs -2k Prior & '55k expected ( April was first loss since Oct 2016)
  • Private payrolls +131k vs 80K Prior, expected

Wages:

  • Average hourly earnings +0.03% m/m v +0.0%/+0.2% m/m Prior/Expected
  • Average hourly earnings +2.9% y/y vs 3.0% exp, Prior 3.0% y/y
  • Average weekly hours  34.4 v 34.4 exp  Prior 34.4

 US Jobs Oct 2019 Weeklly Earnings by Industry

 

Household Survey Data

Both the unemployment rate, at 3.6 percent, and the number of unemployed persons, at 5.9 million, changed little in October.

Among the major worker groups, the unemployment rates for adult men (3.2 percent), adult women (3.2 percent), teenagers (12.3 percent), Whites (3.2 percent), Blacks (5.4 percent), Asians (2.9 percent), and Hispanics (4.1 percent) showed little or no change in October.

The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 1.3 million in October and accounted for 21.5 percent of the unemployed.

The labor force participation rate was little changed at 63.3 percent in October, and the employment-population ratio held at 61.0 percent. Both measures were up by 0.4 percentage point over the year.

The number of persons employed part time for economic reasons, at 4.4 million, changed little in October. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs. 

In October, 1.2 million persons were marginally attached to the labor force, down by 262,000 from a year earlier. (Data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. 

Among the marginally attached, there were 341,000 discouraged workers in October, down by 165,000 from a year earlier. (Data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 888,000 persons marginally attached to the labor force in October had not searched for work for reasons such as school attendance or family responsibilities.

US Jobs Oct 2019 Industry

Establishment Survey Data

Total nonfarm payroll employment increased by 128,000 in October. Job growth has averaged 167,000 per month thus far in 2019, compared with an average monthly gain of 223,000 in 2018. In October, notable job gains occurred in food services and drinking places, social assistance, and financial activities. Employment declined in motor vehicles and parts manufacturing due to strike activity. Federal government employment also was down, reflecting a drop in the number of temporary jobs for the 2020 Census.

In October, food services and drinking places added 48,000 jobs. Job growth in the industry has averaged 38,000 over the past 3 months, compared with an average monthly gain of 16,000 in the first 7 months of 2019. Employment in social assistance increased by 20,000 in October and by 139,000 over the last 12 months.

Most of the gain occurred in individual and family services, which added 17,000 jobs over the month and 111,000 over the year. In October, employment in financial activities rose by 16,000, with gains in real estate and rental and leasing (+10,000) and in credit intermediation and related activities (+6,000).

Financial activities has added 108,000 jobs over the last 12 months. -3-Employment in professional and business services continued to trend up in October (+22,000). The industry has added an average of 33,000 jobs per month thus far in 2019, compared with an average gain of 47,000 jobs per month in 2018. Health care employment continued on an upward trend in October (+15,000).

Health care has added 402,000 jobs over the last 12 months. Manufacturing employment decreased by 36,000 in October. Within manufacturing, employment in motor vehicles and parts declined by 42,000, reflecting strike activity. Federal government employment was down by 17,000 over the month, as 20,000 temporary workers who had been preparing for the 2020 Census completed their work.

Employment in other major industries—including mining, construction, wholesale trade, retail trade, transportation and warehousing,and information—showed little change over the month. In October, average hourly earnings for all employees on private nonfarm payrolls rose by 6 cents to $28.18.

Over the past 12 months, average hourly earnings have increased by 3.0 percent. In October, average hourly earnings of private-sector production and nonsupervisory employees rose by 4 cents to $23.70.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours in October. In manufacturing, the average workweek decreased by 0.2 hour to 40.3 hours, while overtime was unchanged at 3.2 hours.

The average workweek of private-sector production and nonsupervisory employees held at 33.6 hours. The change in total nonfarm payroll employment for August was revised up by 51,000 from +168,000 to +219,000, and the change for September was revised up by 44,000 from +136,000 to +180,000.

With these revisions, employment gains in August and September combined were 95,000 more than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.) After revisions, job gains have averaged 176,000 over the last 3 months.

The Employment Situation for November is scheduled to be released on Friday, December 6, 2019 at 8.30 EST

 

Other US September Employment Component Releases

Weekly initial jobless claims for the week of September 28

  • Initial jobless claims 219K vs 215K estimate The prior week revised to 215K from 213K
  • Jobless claims 4 week average 212.5 K which is unchanged from the previous week
  • Continuing claims for the week of September 21 1651K versus 1654K estimates. The prior week was revised to 1656K from 1650K
  • Continuing claims 4week average 1661.5 K which is lower from last weeks revised 1667.2 5K

The largest increases in initial claims for the week ending September 21 were in Michigan (+4,258), Kansas (+1,475), Missouri (+1,224), Tennessee (+1,191), and Indiana (+796),

The largest decreases were in New York (-1,777), Georgia (-946), South Carolina (-854), New Jersey (-737), and Florida (-571).

US September Challenger, Gary and Christmas Inc Job Cuts

  • Job cuts -24.8% vs 39% prior
  • Layoffs 41.55K vs 54.480K prior

The data provides information on the number of announced corporate layoffs by industry and region and acts as a general labour market indicator. The pace of job cuts slowed in September

ADP Jobs Report

  • 135K job additions vs 140K consensus. Prior 195K (revised to 157K)
  • Service providing +127K
  • Goods producing +8K
  • Natural resources -3K
  • Construction +9K
  • Manufacturing +2K
  • Small business +30K
  • Midsized +39K
  • Large +67K

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August 2019 U.S. Employment Report Recap

The Fed Chair Powell came out with a more dovish tone as expected at the last FOMC following market fatigue from the trade wars and the resultant uncertainty. There has been an ongoing campaign by US Presdent Trump calling for lower rates and criticising the Federal Reserve for raising in the past year.  Federal Reserve President Powell and other Fed Governors have admitted they are unsure of the path for wages and inflation. In February American wages hit their highest levels in a decade at 3.4%, but has fallen back to 3.2% in August.

The market expected the August report released Friday to see nonfarm payrolls rise in line with longer-run trends in monthly employment growth at a consensus of  164,000 new jobs, it came in right lower at 130,000. Logic suggests a return to the mean after the volatility in the hiring data. The wages data gives us indications of the FOMC plans on rates into 2019 and 2020. Unemployment is near a 49 year low with higher participation and the two month NFP revision was -20,000 change to jobs last month.

However, the combination of weaker PMI readings and skill shortages amid a low unemployment rate of 3.7% pose downside risks. More important could be the earnings data, which missed expectations in April and May. Any further cooling of pay growth would raise the odds of the FOMC’s next policy change being a rate cut.

 

Source: AFP, Challanger, DOL, TradersCommunity Data, BLS

From The TraderCommunity Research Desk

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