America’s jobs report: The upside
Oct 7th 2011, 16:05 by G.I. | WASHINGTON
SOMETIMES it’s the absence of bad news that’s the best news of all. This morning the government reported that nonfarm payrolls in America grew by 103,000 from August to September, and previous months’ figures were revised up a total of 99,000. The August goose egg is no more; employment rose by 57,000. Both August and September were distorted by a Verizon Wireless strike, so the two-month average of 80,000 is a better indicator of underlying job growth. Government continues to be the main drag; state and local governments cut 33,000 jobs while private payrolls increased by 137,000.v
Commentators from both the left and the right grouse that these are tepid numbers, barely enough to keep up with population growth, and point out that the unemployment rate remained at 9.1%, unchanged from August. Yes, but. What matters at turning points is the second derivative, the change in the change. Nonfarm payrolls were less weak than expected, beating the consensus of 60,000. One upside surprise does not an all-clear make, but this is one of several: unemployment insurance claims were lower than expected, and automobile sales and the factory purchasing managers index were higher in September than expected.
The best filter for the newsflow is the 10-year Treasury yield. When it goes up, good news prevails. When it goes down, bad news does. (This relationship holds even though the Federal Reserve’s quantitative easing imparts a downward bias to yields.) As the accompanying chart shows, good news now has the upper hand.
The economy is by no means out of the woods. The biggest threat (and the biggest driver of bond yields) remains policy, specifically Europe’s. Stockmarkets are better bid this week on hopes that Europe is moving to recapitalise its banks. Those hopes could come to naught if Europe doesn’t also address sovereign solvency, and as this week’s issue points out, it has not. But, policy aside, America’s economy is doing all right: as of September, it has avoided recession.