The best comment I've seen on the October U.S. jobs numbers comes from Steven Ricchiuto, chief economist at Mizuho Securities in New York.
"The details of the October labour market report show that the economy is still chugging along at a breakneck speed of about 1.5 per cent," he said in an analysis of the Labour Department's latest snapshot of hiring.
Excellent use of irony, Mr. Ricchiuto.
There is nothing "breakneck" about a growth rate of 1.5 per cent, of course. Most economists will tell you that it will take growth of 3 per cent or higher to materially lower the unemployment rate, which was 7.9 per cent in October. The Federal Reserve calculates the U.S. trend rate of unemployment is at least 6 per cent, if not lower. It took three years for the jobless rate to drop from is recession peak of 10 per cent to below 8 per cent. Trend still is a long way off.
Now, note Mr. Ricchiuto's choice of verb: "chugging."
Again, hardly inspiring. But recall where the U.S. economy was only a few months ago: "stuck in the mud," to borrow Fed chairman Ben Bernanke's phrase. After adding more than 200,000 jobs for three consecutive months through February, non-farm employers increased their payrolls by an average of about 86,000 for four straight months through June. With revisions to August and September, payrolls now have risen faster than the 2012 average of 157,000 for three out of the past four months. In October, businesses added 171,000 jobs, much better than Wall Street's consensus expectation of 125,000.
Say what you will about the U.S. economy, but you can no longer call it "stuck," nor is there serious reason to worry about a new recession. Within the latest jobs data, there is evidence the Fed's extraordinary efforts to keep interest rates ultra-low are having an impact.
Retailers added 36,000 positions in October, including 4,000 at furniture and home furnishings stores. The construction industry, buoyed by resurgence in the housing market, added 17,000 jobs last month, compared with a gain of 2,000 in September. Those figures support the Conference Board's latest index of consumer confidence, which rose to 72.2 last month, the highest since February 2008.
That's positive; dare I say progress. Yet there's reluctance to recognize it.
Many commentators Friday talked about context – the fact that there still are some four million fewer jobs today than before the recession; the more than eight million people who say they are working part time when they'd like full-time hours – or their outlooks for the future, which are bleak because of Europe's recession and the U.S. fiscal cliff.
It's vital to acknowledge both. The U.S. labour market is performing as it would if the economy simply was in a normal expansion, rather than a recovery, which is its true state. And there is little doubt that executives are extremely wary about the global economy's short-term prospects.
But one wonders if crisis fatigue is keeping analysts and investors from spotting the turn? For sure, there are too many unemployed Americans. Five million people – 40 per cent of the total number of unemployed – have been without a job for more than 27 weeks, a terrible number because the longer people are stranded on the sidelines of the labour market, the harder it becomes to re-enter. And yes, failure by Washington politicians to sort out the budget could derail the economy.
Or, with the high-stakes Nov. 6 election out of the way, Washington could press reset and get serious about the fiscal cliff, which, by the way, is what most expect will happen. Peter Hall, chief economist at Export Development Canada, is one of the few forecasters looking through Washington's budget politics. He foresees a resolution and economic growth next year of nearly 3 per cent. Most on Wall Street predict the U.S. economy will expand around 2 per cent in 2013.
But even if you are relatively downcast about the U.S. economy, there is only one way to read the October jobs report. It is evidence of improvement, which is significant given recent history.