This morning, the Bureau of Labor Statistics (BLS) released The Employment Situation – October 2019. It showed the US economy created 128K net new ‘payroll’ jobs and the Unemployment Rate increased slightly to 3.6% from 3.5%. This was due to an increase in the ‘civilian labor force’ of 325K relatively to the creation of only 241K jobs reported at the household level.
The difference between the two numbers is the former comes from a survey of businesses and employers, and the later is from calling individual households. There is normally a discrepancy between the two in absolute terms on a monthly basis, but the two ultimately converge over time directionally.
Regardless, the report suggested the US labor market remains reasonably tight despite the recent slowdown in: structural investment (think commercial real estate), inventory growth (inventories growing at a decreasing rate which takes away from the equation), and general business to business activity sluggishness including a slight dip in technology purchases.
Highlights of the report for ‘cocktail party conversation’ are:
- Labor Force Participation Rate increased from 63.2% to 63.3%, its highest level since September 2013 from what I can tell.
- Employment to Population Ratio stayed put at 61.0%, the highest level since the end of 2008.
- Households reported an increase of 241K jobs during the month.
- Businesses reported a net increase of 128K jobs during October 2019.
- Goods-producing jobs were down 26K
- Construction jobs were up 10K
- Manufacturing jobs were down 36K, completely due to strikes at automakers (GM)
- Service sector jobs increased 157K
- Trade was up 26K
- Information jobs were down 4K
- Financial activities were up 16K
- Professional & business services employment was up 22K
- Education & health services were up 39K
- Leisure & Hospitality jobs increased 61K
- Other service jobs were off 3K
- Government jobs were down 3K
Combined, it was an okay report for any given month. However, it was a GREAT report for where we are in the economic cycle and for all the recent talk about a looming recession. Recessions come and go, and the stronger the labor markets are leading into one the softer the ultimate downturn should be. As I type here today, some elements of the GDP equation ARE in some form of contraction, namely within I variable (private fixed Investment) of the C+I+G +/- Net Exports equation. However, nothing appears calamitous, yet, as is evidenced by the continued job creation numbers. In a consumer driven economy, a healthy labor market bespeaks of a healthy consumer which, well, you get the picture.
In the end, this was a pretty good report, which suggested ‘the bear’ isn’t quite knocking down the door despite the recent suggestions it is.
John Norris
The opinions expressed here are mine and mine alone, and are subject to change. They should not be construed as offer to provide investment services of any type NOR should they be considered a recommendation of any sort.