Payrolls Rise 151,000, Unemployment Holds at 9.6%

Wall Street got a surprise this morning when the US Labor Department released the non-farm payroll figures for October, beating estimates by tens of thousands with a 151,000 increase. Moreover, Labor revised September's 95,000 decline in jobs to just 41,000. Because of the quirks in calculating it, these extra jobs didn't force down the unemployment rate of 9.6%. In all, the labor market is getting better, but it isn't good enough yet.

The private sector has started hiring in reasonably serious numbers. Business added 159,000 jobs in October. The 8,000 government jobs lost came from state and local government more than federal employment at a rate of 7:1. The census jobs are just about all gone, with only 6,000 workers still involved in the decennial count. The number of temporary workers climbed 34,900 in October, and this tends to be a leading figure for future employment hopes as temporary jobs tend to become permanent when the economy strengthens.

Dissecting the 159,000 private sector jobs, Labor reports that service firms accounted for the lion's share of hiring, putting 146,000 workers on their payrolls in October. Construction was looking slightly better with 5,000 new jobs, but manufacturing lost 7,000.

Retailers, who are counted in the service sector, added 27,900 jobs in October. With the holiday shopping season yet to begin, this sector looks very promising. Shobhana Chandra writing for Bloomberg reported, "Department store chain Kohl's Corp. plans to hire about 40,000 people for the holiday period, 21 percent more than last year. Toys 'R' Us Inc. said it may add about 45,000 employees for the season, including 10,000 at its temporary stores." She also noted, "Rockwell Collins Inc., a Cedar Rapids, Iowa-based maker of cockpit instruments and radios, on Oct. 29 said it will hire 800 people, boosting staff by 4 percent during the next 12 months. Ford Motor Co., the second-largest U.S. automaker, plans to add 1,200 jobs in Michigan by 2013 as sales rebound."

This journal underestimated the severity of the psychological shock businesses have suffered since Lehman went bust and anticipated a jobs recovery by now. Clearly, the expectation of job growth over the summer and autumn was premature. Nevertheless, these results suggest the economy has bounced off the bottom and won't revisit it. American business is sitting on $1 trillion or more in cash, and business doesn't generate profits by stuffing cash under mattresses long term. The elections are over, the Fed has announced another $600 billion in quantitative easing, and the holidays that lie ahead are expected to be the best for business in the last few years. Sometime before 2012, non-farm payrolls will come in at more than 300,000, and then, the dam of pent-up demand and under-used capital will burst. Of course, this journal has been wrong before.

© Copyright 2010 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Ubuntu Linux.

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