Friday, November 02, 2007

Job Creation Healthy, Unemployment Still Historically Low, Earnings Rising Almost Twice Inflation, Factory Orders Rebound

- The Change in Non-farm Payrolls for October was 166K versus estimates of 85K and 96K in September.

- The Unemployment Rate for October was 4.7% versus estimates of 4.7% and 4.7% in September.

- Average Hourly Earnings for October rose .2% versus estimates of a .3% gain and a .3% increase in September.

- Factory Orders for September rose .2% versus estimates of a .7% decline and a 3.5% decline in August.

BOTTOM LINE: American employers added almost twice as many jobs as forecast in October, Bloomberg reported. The unemployment rate held at a historically low 4.7%. Service industries, which includes banks, insurance companies, restaurants and retailers, added 190,000 jobs. Average Hourly Earnings rose 3.8%, which is very high by historic stands and almost twice most measures of inflation. For two years, we have been hearing that the housing downturn would lead to imminent massive job loss, and there remains little evidence of this. Fed fund futures now imply a 72% chance for another 25 basis-point-cut at the upcoming December meeting, up from a 60% chance yesterday. I continue to believe the US job market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.

Orders to US factories unexpectedly rose in September, suggesting companies remain confident the economy will continue to grow, Bloomberg reported. Excluding transports, demand jumped 1.4%. Bookings for capital goods excluding aircraft and military equipment, a measure of future business investment, rose .6% versus a .1% gain in August. Manufacturers had enough goods on hand to last 1.24 months, the same as the prior month. I continue to believe manufacturing will help boost overall US growth over the intermediate-term as companies gain confidence in the sustainability of the current expansion and rebuild depleted inventories.

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