Friday, October 5, 2012

September Employment Report & Its Revisions Made Everything Appear Better

The September employment report was certainly a surprising one, even though the NFP count came in only 1K higher than the Street's estimate.  The August number was revised up by 46K! Again, August's NFP, the figure that many believed pushed the Fed to implement QE3, was revised up by 46K, thanks to nice bump up in government jobs!  The number of government jobs added in August was revised up by 52K, which pushed it from -7K to +45K!  Conspiracy theorists please come out and make a statement; the time is now.  So, let's put it this way - change in NFP for the past two months was 256K, compared with our 241K estimate, and the Street's ever-conservative 210K.  With respect to various government economic data, which continue to be revised up or down significantly, our models' 'revision factors' need significant adjustments continuously.  One thing is certain; today's numbers will give President Obama a lift which he certainly needed after that embarrassing performance in the first election-2012 debate earlier this week.
  • September NFP came in at 114K, below our 145K estimate and slightly above the Street's 113K.  As a reminder, the August NFP was revised up by 46K.  By the way, the July number, which was revised down by 41K in the August employment report, was revised up by 41K in the September report!  We are trying to give conspiracy theorists more ammo. 
  • The official unemployment rate fell to 7.8%. 
  • Private NFP went up by 104K, which means that 10K of jobs added were in the government sector.  Unlike the rest of the Street, we had assumed an increase in government jobs.  However, what caught our eye was that a big chunk of the overall NFP upward revisions for July and August was in the government sector!  For July and August, the number of government jobs were revised up by 39K and 52K, respectively!
  • Although manufacturing declined by 16K (we had assumed a slight increase), construction and education & health services went up by 5K and 49K, respectively.
  • By the way, while the official unemployment rate dipped 30bps to 7.8%, the U-6 figure remained unchanged at 14.7%.
  • Given the endless number of revisions in this report, looking at the net changes is basically useless, in our opinion.  We are confident that this report will make the next Presidential debate even more interesting.  Some new words or phrases will likely be added to the Presidential debate drinking game.

S&P 500 is up 0.5% while VIX is down more than 5%.  Gold futures is down around $10.  By the way, congrats to the Yankees for winning the AL East, and we are hoping the Jets will at least show up for the Monday night game against those Texans.

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