US jobs broadly in line with expectations but unemployment rate drops surprisingly

<p>Jobs data out of the US today showed that last month saw an increase of 120,000 non-farm payrolls and 140,000 private payrolls, falling broadly in […]</p>

Jobs data out of the US today showed that last month saw an increase of 120,000 non-farm payrolls and 140,000 private payrolls, falling broadly in line with analyst forecasts. October’s non-farm and private payrolls were, however, upwardly revised, marking a second straight month of upward revisions for previous jobs data. However, the surprising element within the US jobs data was that the US unemployment rate dropped from 9% to 8.6% last month, which had not been anticipated.

US Jobs Result

Actual Forecast        October Revisions (Previous)
Non-Farm Payrolls 120,000 122,000 100,000                     (80,000)
Private Payrolls 140,000 140,000 117,000                     (104,000)
Unemployment Rate 8.6% 9.0% 9.0%                          (9.0%)

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The data paints a rosier picture of the US labour market over the last three months than has initially been feared, with employment now rising for four months in a row, showing a consistency of hiring.

The jobs report in general is better than expected, taking into account the fact that both non-farm and private payrolls fell in line with expectations. There was a boost in jobs for October as compared to previous suggestions and a drop in the unemployment rate.

That said, there had been heightened expectations already going into the jobs numbers today, which is one of the reasons why stocks have rallied over 1.5% before the jobs figures were released. Therefore, whilst the jobs numbers are good, there is an element of disappointment that they were not stronger. With the FTSE 100 currently enjoying its best one week rally since December 2008, we have started to see investors lock in their gains after the jobs numbers, to protect profits ahead of the weekend break.

The below chart tracks the Wall Street Index against monthly non-farm payrolls. The strong correlation shows just how important non-farm payrolls are for equity demand and the health of the US economy in general.

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