The US Bureau of Labor Statistics' October Nonfarm Payroll numbers showed an additional 171K jobs were added, while the Unemployment rate ticked up to 7.9%, beating expectations for payrolls and in line for the unemployment rate.
The data was released despite the tragedy that occurred in the northeastern region of the United States this week when hurricane Sandy hit the region. This jobs report carries a bit more weight than other releases as it is the final employment report to be released before the Nov. 6, 2012 presidential election. Since most of the presidential campaign trail has revolved around jobs and the economy, what comes up in this report could be a catalyst to push swing voters to either side.
The September 2012 NFP report provided an upside surprise, beating market expectations on both jobs added and the unemployment rate. Consensus was for an addition of 113,000 jobs and an uptick in the unemployment rate to 8.2%, but the report showed an addition of 114,000 jobs and a drop in the unemployment rate to 7.8%. Consensus for the October report is for an addition of 125,000 jobs and an uptick in the unemployment rate to 7.9%.
The rise in labor participants that reduced the unemployment rate is an important metric that must be taken into account because it shows that the labor force is starting to gear up as the pressure of current jobless conditions are not being tolerated. While at first glance it is to be assumed that the downtick in unemployment was due to a reduction in the workforce, the actual numbers show that the workforce and participation rate actually went up, according to the numbers presented by the BLS. Also, it shows that there is growing availability of employment opportunities. September marked the first time the unemployment rate in the US dropped below 8% in 11 months.
Data provided by BLS.gov
Since the peak in late 2009 of 10%, the US Unemployment rate has been on a slow but steady downtrend.
Data provided by BLS.gov
The addition of jobs has also been on a slow but steady decline, but the last twelve months have not been able to trend in a manner that shows a strong recovery, with the workforce peaking in January 2012 when an additional 275,000 jobs were added.
The Bureau of Labor Statistic's Job Opening and Labor Turnover Survery (JOLTS) shows that, for the past 12 months, the number of hires has been above the number of separations (layoffs and quits), but the difference between the two has not diverged enough to really instill confidence that the labor market is out of the woods. The number of openings has declined since July 2012 as businesses remain cost-effective and reduce their employee seeking efforts.
Numbers in Thousands; Data provided by BLS.gov
U.S. Jobless Claims have also remained stagnant, keeping between 400,000 and 300,000 for most of the year, furthering the idea that the recovery in labor remains slow.
Data provided by BLS.gov
While the labor environment remains bleak, the holiday hiring season is now in effect with many retail business starting their early hiring phases. Challenger Grey estimates that retailers are to add around 700,000 jobs between October and December, slightly lower than the 720,000 jobs added last year. The sentiment around the holiday shopping season isn't as optimistic as last year, but businesses are getting ready for the shopping season anyway. According to a radio interview on October 5, 2012 with Michael Erwin, an employment specialist with Career Builder, every major region of the United States is hiring for the holiday season and not just in the retail sector, with the Los Angeles region leading the way. Areas such as hospitality, customer service, and administration are showing high levels of hiring for the holiday season. He also states that many of these jobs will evolve into perpetual positions and not just temporary holiday fills.
Several companies have already announced that they will be partaking in holiday hiring efforts to keep up with the demand that is expected from the holiday season. Toy's R' Us looks to hire an additional 45,000 positions nationwide; Target (NYSE:TGT) an additional 90,000 positions; Kohls (NYSE:KSS) looks to add 52,700 jobs; Amazon (NASDAQ:AMZN) will try to fill 5,000 positions; Macy's (NYSE:M) looks to hire 78,000 people; J.C. Penney (NYSE:JCP) announced 35,000 jobs will be added for the Christmas season; and Best Buy (NYSE:BBY) looks to add 15,000 jobs. This is a small list of the companies that will be providing jobs for the labor market this quarter, and most of them have already started their hiring.
While the anticipation of higher sales is lower this year than last year, two factors must be taken into consideration when determining the level of hiring for the holiday season: Business Confidence and the drop in the Unemployment rate. The ISM Business Confidence Index has ticked higher to 51.5% from last month's 49.6%; right in time for seasonal hiring. The Business Confidence Index for the last 12 months is shown below:
Business confidence is a key metric that shows whether or not businesses are optimistic about growth, which would eventually lead to job hiring. While the past few months have shown that confidence has been low, the jump back above 50.0% right before the holiday season is fully engaged proves positive given the overall economic uncertainty across the globe. The business confidence combined with an increase in the participation in the labor market (lower unemployment rate), signals that this quarter will maintain considerable gains in employment as non-working citizens look for work to obtain extra or even new income to provide for their holiday shopping efforts. ADP has already shown a gain of 158,000 private sector payrolls, but this is based on a new proprietary formula that was implemented this month so it is unsure how reliable it will be when compared to the government data.