US jobs report is a sigh of relief for markets, maybe for Obama too
By Jose Pineiro
Fri 05 Oct 2012
LONDON (SHARECAST) - The US monthly employment report, a traditional market-driver if there ever was one, has revealed a headline figure that is sure to put more than a few smiles on traders who are bullish in this market.
The unemployment rate fell by three decimal points from 8.1% to 7.8% in September compared to a market consensus estimate of 8.2%. The unemployment rate has not been this low since January 2009.
Non-agricultural jobs, a key indicator, came in at 114,000, slightly topping the 113,000 expected. Furthermore, the previous month’s figure was revised higher from 96,000 to 142,000.
The U6, a much broader measure of unemployment that takes into account people who have stopped looking for work, stood at 14.7% in September, unchanged from August.
104,000 private jobs were created compared to the revised figure of 97,000 for August. The public sector added another 10,000 jobs, compared to the revised figure of 45,000 for August.
114,000 jobs were created in the services sector (vs. 119,000 in August), 16,000 jobs were destroyed in manufacturing (vs. -22,000), and 5,000 jobs were created in construction (vs. 1,000).
The average weekly hours rose by 10 basis points to 34.5 while average earnings rose 0.3% monthly and 1.8% annually (vs. 0.2% and 1.8% in August).
"This latest jobs data is a positive surprise thanks to the decline to the unemployment rate. Also very relevant is the fact that the U6 rate stayed below 15%. Non-farms payroll came in slightly better than expected but upwards revisions to previous months are a big plus," said Web Financial Group analyst Francisco Miñana.
"In any case, non-farm payrolls remain far from the 200,000 jobs that is deemed necessary each month in order to absorb new people entering the workforce. The lower unemployment rate could be affected by people dropping from the workforce. In conclusion, this report should have positive implications for the dollar and equities while negative for Treasury prices."
WILL THIS SECURE OBAMA'S RE-ELECTION
This jobs report is also important for another reason. It plays a crucial role in the US presidential campaign. The weak jobs market has been one of Mitt Romney's main weapons against Obama.
Although the improved jobs picture should help get President Obama re-elected, not everyone is so sure. "If they [jobs] stay in a slightly positive territory they probably won't change the minds of too many voters," said Matt Jacobsmeier, political science professor at the University of New Orleans.
The latest poll conducted by Reuters and Ipsos shows that Obama remains ahead of Romney even though Romney was clearly deemed the winner of the first debate by most accounts. Nonetheless, no president has been re-elected with an unemployment rate above 7.4% since Roosevelt.
The economic and political fronts now appear to be more intertwined than ever. This year's presidential election is dominated by the employment and "fiscal cliff" issues. An agreement will have to be reached across party lines to prevent the "fiscal cliff", the term given to the scheduled expiration of the George Bush tax cuts alongside automatic public spending cuts.
"Businesses are not hiring people, they want to wait and see how the election evolves and how the political landscape shapes up," said Sung Won Sohn, an economics professor at California State University Channel Islands. "Everyone has kind of battened down the hatches."