What Does October Jobs Report Mean For Consumer Morale And Spending?

Jobs Friday is on us yet again, and this time around, the normal hype around this monthly release is muted. The reason: Many see this numbers as having very little impact on the Fed's monetary policy outlook. This being the presidential election year, economists widely believe the central bank may hold fire until they can conjure up a policy framework for an intermediate term.

The Headline Number

A Labor Department report release that came out a short while ago showed that the economy added 161,000 jobs in October. The gains came in below the 178,000 consensus estimate.

In September, the economy added a revised 191,000 jobs compared to the 156,000 additions estimated initially.

The Labor Department did state Hurricane Matthew, which affected the East Coast during October, had some impact on the survey numbers.

Supplementary Data That Matters

  • Services Steamroll, Manufacturing Still in Doldrums
  • Private payrolls, which leave out the government sector, expanded by 142,000 compared to 188,000 in the previous month, with all the gains coming from the private service providing sector. The government sector added 19,000 jobs.

    Among the sectors that saw buoyant job gains were healthcare, professional and business services and financial activities.

    Job gain in the goods-producing sector was static, with gains in the construction sector canceling out losses in the manufacturing and mining & logging sectors. The housing market is on a roll, with the latest housing market numbers vouching for the fact.

    That said, the manufacturing sector bled jobs for the third straight month, reflecting the lackadaisical nature of the recovery in the sector.

  • Benign Jobless Rate
  • The jobless rate, which is the number of people who are jobless but seeking employment expressed as a percentage of employable people among the population, was 4.9 percent, down from 5 percent in September. The labor force participation rate was also little changed at 62.8 percent.

  • Wage Inflation Picking Up
  • Average weekly hours remained unchanged at 34.4 hours. The average hourly earnings rose 0.39 percent month-over-month and climbed 2.8 percent year-over-year to $25.92. In comparison, the month-over-month gain in the metric was a mere 0.3 percent in September. The improvement was attributed to calendar effect.

    Commenting on the report, Jed Kolko, chief economist with job site Indeed said, "The October jobs report was as good as an optimist dared hoped for."

    "While job growth of 161,000 was slightly below consensus and the prior-year average, it was more than strong enough to keep the labor market improving, and revisions to previous months were solidly up," Kolko added.

    "With hourly earnings up 2.8 percent year-over-year, the fastest since the crisis, workers are sharing the benefits. If you wanted to show that the economy is still getting better for the typical voter, this report gives you what you needed."

    Remaining Question

    With the job market alive and kicking, can retailers be smug about their holiday sales prospects?

    The average job growth for the year, though having slipped back from the levels in 2015, is still elevated. The unemployment rate is also holding close to multi-year lows. Added to that, there has been a pickup in wage growth. That makes the case for a strong spending environment.

    Government data released last week showed a fairly robust increase in consumer spending for September.

    However, consumer morale has taken a beating in the recent past despite strong economic momentum. Final consumer sentiment reading released by the University of Michigan in late October showed a slip back in confidence to the lowest since 2014. The souring of sentiment is traceable back to election jitters rather than fundamentals per se.

    With the October jobs report supporting the thesis of strong job market conditions, retailers can at least heave a sigh of relief that consumers will turn up, and the best months of their calendar year may not after all be a disappointment.

    The SPDR S&P 500 ETF Trust SPY is currently up 0.15 percent at $209.10.

    Posted In: IndeedJed KolkojobsJobs Reportlabor departmentOctober jobs reportNewsEducationEcon #sGeneral

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