Very solid number in many respects
- NFP +151k plus Net revisions +110k
- Private sector job gwth +159k
- Average hourly earnings +0.2% and index of aggregate hours +0.4% will combine with the jobs increase to produce a very strong personal income number for October
- Hours data will also show up in stronger industrial production, cap u, etc.
- Unemployment rate unch at 9.6% but that is well understood to be the last labor market indicator to turn
- Some industry highlights in terms of net job changes: Construction +13k; Retail +16k; Temp +11k; Leisure and Hospitality -24k
- Diffusion index roughly unch at 55 (from 55.6)
- Median duration of unemployment at 21.2 from 20.4; U6 measure at 17% from 17.1%
The income gains generated from this number plus recent equity gains put consumer balance sheets in much better shape; the mix between spending, savings and debt reduction remains to be seen, but the outlook for spending is certainly better than it appeared before today.
So it looks like a 9% budget deficit is sufficient to overcome the drag from the 0 interest rate policy and the size of the Fed’s portfolio to support GDP at modest levels of growth, perhaps just above levels of productivity increases, which means a very modestly improving employment outlook.
But not enough for a meaningful reduction in the output gap, which probably requires a fiscal adjustment like a payroll tax suspension, or a jump in private sector credit expansion via houses and cars.
QE2 will add a bit more drag, but probably not enough to make much difference.
Extending the tax cuts is a positive for demand versus letting them expire.
But that would not be a tax cut, just not a tax hike.
And there’s a chance it would get ‘paid for’ with a spending cut elsewhere, maybe social security or medicare after the sustainability committee reports Dec 1 and scares them all.
Still looks like fear that we might be the next Greece is turning us into the next Japan.