Employment Report Results
The non-farm employment change, the most-watched section of the report, showed that 171,000 net jobs were added. It was a huge jump from forecast as the market had only initially expected that 123,000 jobs would be created. To add to the good news, the figure for September was also revised higher to 148,000 from 114,000.
But despite the better-than-expected job creation figures, the percentage of unemployed people of the workforce ticked higher to 7.9% from 7.8%. Moreover, average hourly earnings remained flat. Analysts had projected a 0.2% rise.
Digging deeper into the employment report shows that hiring was primarily driven by gains in professional and business services (+51,000), health care (+31,000), and retail trade (+36,000). All in all, since the start of 2012, employment growth has averaged 157,000 per month, which is roughly the same as the 153,000 average monthly rise we saw in 2011.
U.S. Dollar Reaction
The better-than-expected non-farm employment change triggered a strong fundamental response from traders. It led to a broad dollar rally, with the U.S. dollar index climbing above the 81.00 handle.
There are a few takeaways from the report.
For one, unemployment remains elevated despite the strong pick up in hiring in the past four months. It seems that the rate at which jobs are created is unable to keep up with the number of people joining the workforce.
Nevertheless, that’s not enough to keep analysts from having high hopes for the coming NFP reports.
Remember that parts of the U.S. have recently been hit by Superstorm Sandy. Despite the damages, which have been estimated to amount to $50 billion, economists expect that construction efforts will soon pick up and consequently prop up hiring for the next few months.
It’s also noteworthy to mention that historically, job growth has had a tendency to be stronger in the last quarter of the year.
But wait, the good news doesn’t end there! Looking deeper at the report, I noticed that the Labor Force Participation rate was up at 63.8% in October. Many consider it as a good measure of people’s confidence in the labor market and this second consecutive monthly gain indicates that the outlook for the job market isn’t as gloomy as it used be.
This is also reflected by the decline in the number of discouraged workers which fell by 154,000 from a year earlier to 813,000.
The drop in part-time employment by 269,000 jobs is also something to be happy about. Keep in mind that part-time employment reflects the inability of those looking for full-time jobs to find them. And so, the decline could mean that there were more full-time jobs available during the month.
Given all this and the market’s fundamental reaction to October’s better-than-expected NFP report, I can’t help but wonder if we’ll see the dollar rally when the employment reports for the fourth quarter are released. What do you think?