Notes from Jim Haughey

Nov 3 2006 9:02AM | Permalink | Email this | Comments (2) |
Blog This! using: Blogger.com | LiveJournal |

By Jim Haughey

The unexpectedly strong jobs report for October leaves no doubt that the economy is rebounding strongly from the summer doldrums caused by high oil prices and the slump in home construction. There will be a quick payoff in added spending with income and confidence — consumer and business — both higher. Contractors and their suppliers will see this in slightly higher demand for building space and facility capacity as well as an improvement in home affordability.

92,000 new jobs were added in October and the monthly survey of employers belatedly found 139,000 additional new jobs in August and September. The separate household survey found 437,000 new jobs in October, dropping the unemployment rate 0.2% to 4.4%, the lowest in five and a half years. The parallel surveys are often at odds on short term trends. The experience from the mature end of previous economic expansions is that the household survey first picks up jobs added in start up and small companies as well as self-employment and that these jobs are later added in revisions to the employer survey job count.

Average weekly earning of production workers increased at a 4.4% annual pace in October in September. This is a large jump in spending power because the Consumer Price Index for October is likely to be reported unchanged or slightly down. October payrolls, the product of wage, jobs and workweek gains, rose 7.3% (annual rate) in October. This becomes 8.6% if the originally reported September jobs report data is used instead of the upward revisions just made.

The October surge in jobs and income is partially a catch up from the slow summer and hence overestimates the trend for the next year. But even if the October gains are not repeated, more modest gains will come on top of a larger base.