| Employment Situation |
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Released On 10/5/2012 8:30:00 AM For Sep, 2012
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Prior | Prior Revised | Consensus | Consensus Range | Actual |
| Nonfarm Payrolls - M/M change | 96,000 | 142,000 | 113,000 | 75,000 to 162,000 | 114,000 | | Unemployment Rate - Level | 8.1 % | | 8.1 % | 8.0 % to 8.3 % | 7.8 % | | Average Hourly Earnings - M/M change | 0.0 % | | 0.2 % | 0.1 % to 0.3 % | 0.3 % | | Av Workweek - All Employees | 34.4 hrs | | 34.4 hrs | 34.4 hrs to 34.5 hrs | 34.5 hrs | | Private Payrolls - M/M change | 103,000 | 97,000 | 130,000 | 100,000 to 165,000 | 104,000 |
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Highlights
Today's report includes a surprise drop in the unemployment rate-but it is statistically questionable. Payroll numbers continued modest improvement. The unemployment rate unexpectedly dropped to 7.8 percent, following a decline to 8.1 percent in August. Payroll jobs in September gained about as expected with a modest 114,000 increase, following an rise in August of 142,000 (originally up 96,000) and an increase of 181,000 in July (previous estimate of 141,000). The net revisions for July and August were up 86,000. Market expectations were for a 113,000 boost for September.
Private payrolls advanced 104,000 in September after increasing 97,000 the month before. The consensus projected a 130,000 increase.
Private service-providing jobs rose 114,000 in September after a 119,000 increase in August. For the latest month, notable gains were in health care (up 44,000), transportation & warehousing (up 17,000), and financial activities (up 13,000).
The goods-producing sector was down with a 10,000 decrease in September after a 22,000 decline the month before. For the latest month, manufacturing jobs shrank 16,000, construction gained 5,000, and mining was unchanged.
The public sector has been revised up. Government jobs actually rose 10,000 in September after a 45,000 jump in August.
Wage inflation has been volatile and the latest number was on the up side. Average hourly earnings growth improved to 0.3 percent in September, following no change in August. Analysts forecast a 0.2 percent rise. The average workweek nudged up to 34.5 hours in September from 34.4 hours in August. Expectations were for 34.4 hours.
Turning to the household survey, the unemployment rate drop reflected an 873,000 spike in household employment versus a 368,000 drop in August. The labor force rebounded 418,000 after a 368,000 decrease in August. The household survey is much smaller than the payroll survey and is more volatile. The smaller sample for the household survey can lead to notable swings in the unemployment rate.
Today's report is mixed. The unemployment rate looks better but "may" be a statistical fluke. Payroll job growth is modest but somewhat better than earlier believed. However, the drop in manufacturing jobs is disconcerting. Net, the report is better than expected at headline levels but has some caveats.
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Market Consensus before announcement
Nonfarm payroll employment in August advanced a mere 96,000, following gains of 141,000 in July and 45,000 in June. The net revisions for June and July were down 41,000. The unemployment rate slipped to 8.1 percent from 8.3 percent in July due to a sharp drop in the labor force-a negative reason for the dip. Private payrolls increased 103,000 in August after gaining 162,000 the prior month. Turning to wage inflation, average hourly earnings were flat after a 0.1 percent rise in July. The average workweek was unchanged at 34.4 hours.
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Definition
The employment situation is a set of labor market indicators based on two separate surveys in this one report. Based on the Household Survey, the unemployment rate measures the number of unemployed as a percentage of the labor force. Other key series come from the Establishment Survey (of business establishments). Nonfarm payroll employment counts the number of paid employees working part-time or full-time in the nation's business and government establishments. The average workweek reflects the number of hours worked in the nonfarm sector. Average hourly earnings reveal the basic hourly rate for major industries as indicated in nonfarm payrolls.
Why Investors Care
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![[Chart]](showimage.asp?imageid=23313)
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During the mature phase of an economic expansion, monthly payrolls gains of 150,000 or so are considered relatively healthy. In the early stages of recovery though, gains are expected to surpass 250,000 per month.
Data Source: Haver Analytics
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![[Chart]](showimage.asp?imageid=23314)
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The civilian unemployment rate is a lagging indicator of economic activity. During a recession, many people leave the labor force entirely, so the jobless rate may not increase as much as expected.
This means that the jobless rate may continue to increase in the early stages of recovery because more people are returning to the labor force as they believe they will be able to find work. The civilian unemployment rate tends towards greater stability than payroll employment on a monthly basis. It reveals the degree to which labor resources are utilized in the economy.
Data Source: Haver Analytics
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