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Carlos Guillen

The highly awaited government jobs data finally arrived, and given that this report would reflect the effects of the most recent government shutdown, many eyes were fixed on the outcome to get an indication of just how bad things were. At the moment Americans are still struggling with rather high unemployment rates, and while there are signs of improvement, the overall picture is still one of suffering and desperation for many out there without work. The jobs results were a bit of a mixed bag, as there were better than expected non-farm job gains, but the unemployment rate ticked higher.

According to the latest data from the Department of Labor, the unemployment rate in October was 7.3 percent, higher than the 7.2 percent reported for September and at par with the Street's consensus estimate of 7.3 percent. Quite surprisingly, the household survey showed that those employed declined by 735,000, but those unemployed increased by 17,000, which resulted in those not in the labor force increasing by 932,000. In essence, the jobs market was hit from all directions in that those employed declined, those unemployed increased, and those not in the labor force spiked, all while the civilian population increased. We should note that this month the number of those employed declined despite the fact that the number of individuals working part-time for economic reasons actually climbed significantly by 124,000. While those "Marginally attached to the labor force" did decline by 19,000, it was not enough to prevent the adjusted unemployment rate from increasing. That is, if we include "Part time for economic reasons" of 8.1 million and the "Marginally attached to the labor force" of 2.28 million to the unemployed number, we calculate an unemployment rate of 13.8 percent, which increased from the 13.6 percent posted for the prior month.

Perhaps the more favorable aspect of the employment report was that non-farm payroll employment in October (derived from the establishment survey) increased by more than expected. The report showed that the increase in non-farm payrolls was 204,000 while the Street's consensus called for a gain of 100,000. This was quite a bit of a positive surprise given that last week, According to ADP, 130,000 private sector jobs were gained during October, which landed higher than the Street's estimate calling for a gain of 125,000 jobs. We should note that during the last 12 months there have been 194,000 jobs added per month, which is an improvement from the 178,000 jobs added per month in the prior 12 months.

Overall, despite overall mixed employment results, investors' enthusiasm after the employment data has not faded, but the reality still stands that the employment backdrop is not likely to significantly improve further for at least the rest of this year and perhaps even into 2014. While consumers have held their heads up high in face of adversity, we believe their confidence will take a hit in the coming months as the employment backdrop continues to drag. This will surely have a negative impact on consumer spending and consequently on gross domestic product growth in the near term.