The employment situation is a set of labor market indicators. The unemployment rate measures the number of unemployed as a percentage of the labor force. 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. (Bureau of Labor Statistics, U.S. Department of Labor) Why Investors Care
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Nonfarm payroll employment in October came in quite strong while wage inflation actually eased. Nonfarm payroll employment in October jumped 166,000, following revised increases of 96,000 in September and 93,000 in August. But initial unemployment claims have since risen and point toward sluggish job gains for November. Construction jobs are likely to post another decline along with manufacturing. And we could see some sizeable losses in financial services as a result of subprime fallout. Layoffs are likely to lead to a modest increase in the unemployment rate which came in unchanged at 4.7 percent in October. But look for a soft increase in wages, which posted a 0.2 percent rise in October, following a 0.3 percent boost in September. Only a very robust employment report would derail a Fed rate cut on December 11 and that is not likely.
Nonfarm payrolls Consensus Forecast for November 07: +65,000
Range: -10,000 to +100,000
Unemployment rate Consensus Forecast for November 07: 4.8 percent
Range: 4.8 to 4.8 percent
Average workweek Consensus Forecast for November 07: 33.8 hours
Range: 33.8 to 33.8 hours
Average hourly earnings Consensus Forecast for November 07: +0.3 percent
Range: +0.2 to +0.4 percent
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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. |
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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. |
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