The employment report, just released, is encouraging in that 151, 000 jobs were added to the US economy in October. However, almost all of the job growth was in services. There was a decline in manufacturing employment.
I will be interested to examine the details of U-6, the broadest measure of unemployment. In addition, the "birth-death" model often adjusts the government statistics in unusual ways that might not link to the reality of the labor market. During the Fall there is seasonal hiring and layoffs to a much greater degree and this is hard to capture in statistics.
The fact that the unemployment rate held steady at 9.6% would seem to indicate the situation is not becoming worse. However, there are perhaps more than 1 million people who have left the workforce. These discouraged workers make up a significant percentage of the total, and will probably rush back into the work force at the first sign of an uptick in employment and the economy. This will likely mean that the American economy could produce new jobs and yet the unemployment rate will continue to rise because workforce expansion is greater than the amount of jobs produced.
At first take, I see the October unemployment report as neutral to slightly positive.
Separately, I notice that European stocks are down across the board on rising tensions relating to financial difficulties in Italy, Greece, and Ireland. This is a development to watch closely.
Finally, there seems to be a divide in China regarding currency policy and the moves of the US in quantitative easing. I find this amazing given that China continues to peg the Yuan, something that arguably has caused great disruption in world currency markets, prompting monetary policy changes by Japan, Brazil, and the US among other countries. Overall, there appears to be a lack of sophistication and understanding by Chinese officials of the world currency markets and the effect of pegging the Yuan. I view this as a threat to international economic growth.
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