Friday, November 2, 2007

Payroll Report: Perfect

Nonfarm payrolls rose 166,000 in October, the Labor Department said Friday, up from September's 96,000 gain, which was revised down by 14,000. August payrolls were revised up to a 93,000 gain from 89,000. The unemployment rate was unchanged last month at 4.7%. Why is this so great?

The Fed put inflation back on the table in Wednesday's release and the really good news in this payroll report was that average hourly earnings increased $0.03, or 0.2%, to $17.58. That was up just 3.8% from a year earlier, suggesting relatively tight labor markets are not putting much pressure on labor costs. If labor costs are contained, their impact on inflation is minimized and then the Fed is able to act and cut rates should the economy weaken.

Had this number been higher than the expected .3%, wages would have then become an inflationary force and may have handcuffed the Fed at the Dec. 11th meeting. It also bodes well for the upcoming Holiday season. A well employed consumer is a shopping consumer and that is good for everyone at this point.


*Out of 278 industries, 53.4% added jobs in October, down from 55.6% in September. Of 84 manufacturing industries, 43.5% added October, the best since July.
*Jobs in goods-producing industries fell 24,000.
*Construction jobs dropped 5,000, bringing the total loss to 124,000 since the peak a year ago.
*Manufacturing jobs fell by 21,000 in October and 203,000 over the year.
*Jobs were also lost not surprisingly at banks and mortgage brokers, where employment fell by 5,000 in October, bringing the total loss to 56,000 since February.
*Job growth was strong in services where employment rose by 190,000, the most since May.
*Food services added 37,000
*Health care added 34,000 jobs
*Employment services added 34,000

A "big picture" view show just how well Bernanke & Co. are managing things. The Dec. 11th meeting will mark the 4th in a row that the Fed has put itself in a position to have total flexibility in its action or inaction. Unlike the Greenspan era in which he was constantly having his actions dictated by events, Bernanke now has total freedom to act to them as he sees fit.

I have said it since the spring and to this point nothing has happened to change my mind yet, Bernanke will go down as the best Fed Chairman we have ever had, no matter how hard Greenspan tries to undermine him.

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