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Authors for macroblog are Dave Altig, John Robertson, and other Atlanta Fed economists and researchers.

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November 03, 2006

The Employment Situation Gets Curiouser And Curiouser

The big news today was not the preliminary report for net job creation in October, but the attention-getting revisions in the employment estimates for the prior three months.  From the Wall Street Journal (subscription required):

U.S. payrolls posted moderate growth last month but prior months were revised sharply higher. The unemployment rate fell to a five-and-a-half year low. The report, which comes just ahead of the midterm election, suggests that labor-market conditions remain very favorable for U.S. workers.

I'll let others argue about that characterization of the labor market, but there is no doubt that the weak-looking preliminary jobs data from September now looks pretty robust:




The preliminary October data suggests a drop-off in employment growth, but you will be forgiven for taking a wait-and-see attitude on that one.  Beyond the absolute number, the sectoral distribution of job creation looks pretty familiar:




The exception there is construction employment, which finally decided to show some real honest-to-goodness shrinkage.  That would be the sign of spillover from the housing market that some have been warning about, but if you want to remain an optimist today brought you this as well: 

A separate report showed that service-sector activity in the U.S. accelerated more than expected in October.

That separate report was on the ISM non-manufacturing report:

The report was issued today by Anthony Nieves, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee; and senior vice president — supply management for Hilton Hotels Corporation. "Non-manufacturing business activity increased for the 43rd consecutive month in October," Nieves said. He added, "Business Activity increased at a faster rate in October than in September. Inventories, New Export Orders, Imports and Inventory Sentiment also increased at a faster rate. Nine of 18 non-manufacturing industry sectors reported increased activity in October. Members' comments in October continue to be mixed concerning current business conditions; however, the majority of the comments are positive. The Prices Index decreased 4.8 percentage points this month to 51.9 percent. The overall indication in October is continued economic growth in the non-manufacturing sector at a faster pace than in September."

Up to today, it was a week of not-so-great economic news.  But several of those reports were concentrated in the sectors that, as the detail on job growth above makes clear, are in fact not doing so great: Manufacturing (here and here) and construction, in particular.  For now, I'm sticking with my call

November 3, 2006 in Data Releases , Labor Markets | Permalink


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Does it seem like the revisions are larger these days? Or maybe I didn't notice in previous years.

I've been watching the diffusion index - and it had been tracking lower, but it has rebounded a little the last couple of months (still at 55%). It's almost like two economies - construction is in recession, manufacturing and retail employment are weak - and everything else is pretty decent.

We will find out soon if there is spillover from the housing bust into the general economy.

Best Wishes!

Posted by: CalculatedRisk | November 03, 2006 at 03:03 PM

So with these revisions plus the 92K increase for last month, employment over the past four months has grown by 593,000. Not awful but not great either. And if real GDP growth has slowed as indicated by the BEA, look out for the rest of this year.

Posted by: pgl | November 03, 2006 at 05:21 PM

We are looking at a situation
where unit labor cost is rising at a 5% rate and prices are going up at a 2% rate. This implies that we are on the verge of a major crash in corporate profits-- these lead s&p earnings and business investments.

Moreover, with hours worked revised up it implies that productivity is even weaker then originally revised. Do not forget that productivity growth -- that is weakening sharply - is one of the greatest leading indicators and is saying that growth is going to continue slowing.

Posted by: spencer | November 03, 2006 at 06:22 PM

The recent FED "Guidance" on Nontraditional Mortgage Product Risk was the weakest imaginable in light of the OCC survey results issued the week before. In that, FED Banks said they plan to FURTHER EASE Mtg. lending criteria this coming year (links below).
So, is it right for Markets to infer they needn't fear the FED here? If so, your bottoming call is more understandable, at least through year-end.


Posted by: bailey | November 04, 2006 at 12:35 PM

Here's what GAO's David Walker has to say about our recent Economic decision making:
"Being an accountant and having a professional responsibility as well as being a father and grandfather, I've seen our long-term fiscal situation deteriorate dramatically in recent years," he said."
It's clear the Bush Administration is DELIBERATELY sinking us into debt so large we will be forced to dramatically cut funding for social programs, but who's job is it to limit the impact of these assaults on our economy's future?
Isn't the FED supposed to be a critical check against economy-wide Economic deterioration? Any explanation that the FED's power is too limited in our post-Glass-Steagall age is absolutely ludicrous. How much risk will it permit its Banks to undertake - "to remain competitive"? It's not an excuse if state Banks refuse to accede to the Fed's recent Casper Milktoast Mtg. lending "Guidance". It's the FED's responsibility to exert it's voice.
The simple truth is the FED and our Republican controlled Congress have shamefully abdicated their responsibilities.
It seems clear the mantra of our Economic Age has become: If it's OK with the FED, it must be OK. Well, it's NOT OK. If this is the best our FED can do, it should be disbanded. Shrill? You bet!

Posted by: bailey | November 06, 2006 at 11:41 AM

Sure enough, On Fri. BB tells markets they've nothing to fear from his FED & on Mon. the DOW goes up 100+ points. Now, that's straight talk.
Curiouser & curiouser indeed.

Posted by: bailey | November 06, 2006 at 05:32 PM

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