Saturday, October 06, 2007

Employment Data Show No Weakness


The September employment data could end recession fears. Payrolls rose a slightly larger than expected 110,000. At least as important, the 4,000 decline in August that caused so much angst was revised to an 89,000 increase.

There will be plenty of talk that the payroll increases the past two months are not large. They are below the 200,000 or so monthly gains that used to be common during strong economic growth. That is indeed true, but those past gains were achieved when there was rising participation in the labor force.

The September increase represents a 0.08% increase on a base of 138,155,000. That is almost exactly a 1% annual rate of increase. That is consistent with population growth. In conjunction with 1% to 2% productivity growth, it correlates to 2% to 3% real GDP growth.

This is not a weak number. It reflects moderate economic growth trends.

Average hourly earnings rose 0.4%. This was a bit more than expected and follows a 0.3% August increase. The year-over-year increase rose to 4.1% from 4.0%. The 4% rate of increase in wage gains, coupled with 1% employment growth, increases consumer spending power at a 5% annual rate. That is plenty to produce 2% to 3% real growth in consumer spending.

These numbers don't show significant weakness in any respect. There is no reason for the Fed to ease based on these data. In fact, the pickup in wage rates and the continued tight labor market conditions may lead to talk that the Fed 1/2% rate cut was too much too soon.

In our opinion, it is more important for the stock market that a recession not develop than that the Fed cut rates further. These numbers are bullish for the stock market in that respect.

--Dick Green, Briefing.com


Find thousands of Bilingual jobs at LatPro.com.

Labels:

0 Comments:

Post a Comment

<< Home