Is The Jobs Picture a Perfect 10?

The October nonfarm payroll report was just released, and while the October number came in worse than expected, there were major upward revisions to both August and September. Does this mean the jobs picture is a "Perfect 10"? This is actually a positive sign, with August coming in at 102,000 jobs, and September being revised up to 191,000 jobs. Here is a link to the full U.S. Bureau of Labor Statistics report. Breaking the report down further, 80,000 jobs were created during the month, with the private sector creating 104,000 jobs. Economists were expecting a gain in October employment of 95,000 jobs and 125,000 private sector jobs. The unemployment rate came in at 9.0%, when it was expected to come in at 9.1%. Average hourly earnings growth came in at 0.2%, versus an expected rise of 0.2%. Average weekly hours came in at 34.7, versus estimates of 34.3 hours. The upward revisions in previous months mean that the modeling from the Bureau of Labor Statistics is way off, and companies are hiring more people than was actually first suggested. It also goes to show that the amount of importance that is placed on the initial reading is becoming less and less important. The initial reading for August was unchanged, while September's initial reading was sharply lower than what it was revised up to this month. One negative was the birth/death model, which showed a reading of 519,000 jobs, the largest reading in 5 years. This is generally a number that is heavily scrutinized, but the markets like the fact that long term unemployment fell 366,000 more then they hate the 519,000 jobs added by the birth/death model. Another good sign to see was the average workweek for all employees remained unchanged at 34.3 hours, and average hourly earnings actually increased by 5 cents to $23.19. In the past twelve months, average hourly earnings have increased by 1.8%. That is well below inflation, but at least it is trending higher, as opposed to deflationary numbers. There were too many blips to call the employment report a perfect 10. We are not creating anywhere near the amount of jobs to bring down the unemployment number meaningfully, or even get back to pre-recession levels. Bo Derek's starring role in the famous movie is safe, but at least the jobs report is better than average. It's definitely worth a second look. ACTION ITEMS:

Bullish:
Traders who believe that the economy will get better sooner rather than later might want to consider the following trades:

• A stronger economy could be beneficial for retail, with names like Macy's M, Target TGT and J.C. Penney's JCP benefiting.

Bearish:
Traders who believe that the economy will take much longer to return to the levels it was prior to the financial crisis may consider alternate positions:

• Dollar stores will benefit, as consumers trade down. Consider names like Dollar General DG, Dollar Tree DLTR and Family Dollar FDO.
  
  

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