Economic Watch: Strong October Job Growth, Consumer Spending Edge Higher
November 08, 2013
UPDATED -- A new U.S. Labor Department report shows there was a net gain of 204,000 jobs in the country during October, far more than economists were predicting, while trucking added just a few jobs.
Despite the additions this pushed the overall unemployment rate up to 7.3% from a five-year low of 7.2% in September and the first increase since May. That’s because the unemployment rate is based on a separate survey of households and reflected the partial federal government shutdown last month.
In trucking 400 jobs were added during October while the wider transportation sector shows no changes from September.
Overall September payrolls were revised up from 148,000 to 163,000 and August payrolls were revised up from 193,000 to 238,000 for a net revision gain of 60,000. The revisions suggest headline job creation surpassed 200,000 for two of the past three months, raising the three month average from a previous level of 140,000 increase to a 201,000 hike.
The October performance blew the median consensus estimate of job gains out of the water, suggesting job creation was much more robust over the past few months than previously reported, said Lindsey Piegza, managing director and chief economist for the investment firm Sterne Agee.
“As we saw in yesterday's GDP report the devil is in the details. Headline growth was quite impressive at 2.8% but the details painted a very different picture. Looking at the consumer, the key component of the economy, it is clear momentum continued to decline with spending falling from a 2% annual increase at the start of the year to just 1.5% in the third quarter,” she said. “Similarly, in this morning's employment report, while headline job creation surpassed even the most optimistic forecast, against a backdrop of declining participation and a reversal in the downward trend in the unemployment rate, it is hard to draw the same conclusion of net improvement, but rather a further juxtaposition between headline strength and detail weakness.”
Goods producing payrolls rose 35,000 in October with an 11,000 gain in construction and a 19,000 increase in manufacturing payrolls.
Service producing payrolls rose 177,000 in October pulling the three-month average up to 162,000.
Government payrolls fell 8,000 in October after a rise of 13,000 in September while federal government payrolls dropped 12,000 with state and local payrolls gaining 4,000.
Meantime, the U.S. Commerce Department reports in September consumer spending increased 0.2% from the month before, following an August hike of 0.3%. The new figures match those forecast by many economists.
Also the saving rate rose to the highest level of the year as incomes increased 0.5% for a second month, while compensation rose 0.4%. Year-over-year personal income is up 3.7%
“Consumers continue to spend, albeit at a controlled pace,” said Piegza “With the jobs picture seemingly improving, consumers should, be enticed to loosen their purse strings especially as we move into the holiday shopping season. Yet, preliminary data have retailers bracing for lackluster end of the year sales. Either the consumer is holding back despite underlying improvement in the economy or headline strength isn't telling the whole story.”
Consumer spending is one of the most important components for the U.S. economy, driving about 70% of all activity.
The consumer spending report was scheduled to be released earlier, but many economic reports have been delayed, due to the 16-day partial government shutdown in October.
Update adds consumer spending report.