Saturday, November 9, 2013

Oct. NFP easily beat all expectations ...

As many already know, the change in NFP for Oct. was much better than we expected, which makes it even better than the market had expected as our estimate was slightly above the consensus.  According to the always reliable government survey conducted by BLS, 204K non-farm jobs were added in Oct.  Excluding change in government jobs, there were 212K jobs added.  

In terms of industries, leisure and hospitality led the way by adding 53K jobs, followed by retail trade, and professional and business services, with each having added 44K jobs during Oct.  

However, the overall retail trade data may be somewhat misleading to most that first think of discretionary goods such as clothing items when they think of retail.  In fact, within clothing and clothing accessories stores, approx. 12.5K jobs were lost.  Retail trade's overall jump in jobs was led by 11.5K in food and beverage stores; and 9.6K in electronics and appliance stores, which we think makes sense as more homeowners (mostly the new ones) are now focusing on upgrading their appliances.  We think this is supported by the slight slowdown we've seen in the housing market lately.  

More jobs in leisure and hospitality was driven by a 37.2K jump in accommodations and food services, which may indicate that restaurants are expecting slightly higher increase in demand during the upcoming Christmas season.   

There was some weakness in computer and electronics products industry (part of durable goods), as approx. 3,200 jobs were lost.  About 2,000 of those were in the semiconductor space.  

Lastly, average hourly earnings went up 2c from Sep '13, but 52c, or 2.2%, from last year.  This is good news, as it is ahead of the latest annual inflation rate of 1.2% (based on Sep '13 numbers).  

Some notable things from the household survey:

  • Number of people saying they are employed part-time due to economic reasons jumped by 124K.  Based on the special note regarding the government shutdown provided by BLS in its report, it does not appear that the shutdown impacted part-time numbers much.  
  • In terms of duration of unemployment, only the ones unemployed for less than 5 weeks increased.
  • And the U-6 unemployment rate moved pretty much in tandem with the U-3 rate (the 'official' one).  U-3 increased 10bps to 7.3%, while U-16 went up 20bps to 13.8%.

While the Oct. numbers were very impressive, in addition to upward revisions of the August and September figures, we believe the uncertainty brought forth by the government shutdown and its temporary resolution will have an impact on businesses hiring going forward.  In addition, similar to what we have seen in the equity market the last couple of weeks (except for Friday) - what we think has been a rotation from riskier industries into more defensive ones - decline in jobs related to clothing stores and increase in jobs related to general merchandise may be showing the businesses are slowly getting defensive too. 

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