Job Creation Healthy, Unemployment Historically Low, Hourly Earnings Rising, Service Sector Jumps

- The Change in Non-farm Payrolls for October was 92K versus estimates of 123K and an upwardly revised 148K in September.
- The Change in Manufacturing Payrolls for October was -39K versus estimates of -5K and an upwardly revised -12K in September.
- The Unemployment Rate for October fell to 4.4% versus estimates of 4.6% and 4.6% in September.
- Average Hourly Earnings for October rose .4% versus estimates of a .3% increase and a .2% gain in September.
- ISM Non-Manufacturing for October rose to 57.1 versus a reading of 54.5 in September.

BOTTOM LINE: Employers in the US added 92,000 jobs in October, and payroll growth in prior months was revised higher for the second time in a row, pushing the unemployment rate to a historically low 4.4%, Bloomberg reported. Last month’s increase in jobs followed gains of 148,000 in September and 230,000 in August, both significantly higher than previously reported. These revisions added jobs in finance, education, health care and leisure and hospitality. Average hourly earnings rose 3.9% from the same month a year ago, which is almost double the recent consumer price index increase of 2.1%(year-over-year). Due to income and job gains, Americans will spend 6.5% more this holiday shopping season according to accounting firm Ernst & Young. Job cuts by US employers are down 15% from October of last year, according to Challenger, Gray & Christmas.

Growth at US service industries unexpectedly jumped in October as lower energy prices and a strong job market boosted consumer spending, Bloomberg reported. Readings greater than 50 indicate growth in industries such as banking, retailing and construction that account for almost 90% of the US economy. A drop in the unemployment rate to a historically low 4.4% is boosting the economy despite a slowing housing market. The Prices Paid component of the index fell to 51.9 from 56.7 the prior month. Prices Paid has plunged from a high of 78.40 in September 2005. The average price of a gallon of gasoline declined to $2.21 at the end of October from $2.33 at the end of September. I expect healthy consumer spending to continue boosting the service sector as the job market remains healthy, incomes continue rising, inflation decelerates, interest rates remain low, stocks rise, gas prices fall further, housing stabilizes at relatively high levels and consumer sentiment improves.