Research & Advice


Big Rebound in Payrolls

October 5, 2007 data as reported by Ned Davis Research.

Nonfarm payrolls expanded by 110,000 in September, close to the consensus of 100,000…But the decline that was is no more.  August was revised up to a whopping gain of 89,000 (nearly all from the government sector / public education) from a decrease of 4,000, the biggest upward revision in a year…Additionally, July’s payrolls were revised up by 25,000 to 93,000.  Nevertheless, employment growth has smoothly downshifted from a monthly average of 142,000 in Q1 to 126,000 in Q2 to 97,000 in Q3.  Private payrolls rose by 73,000, a little above the ADP estimate of 58,000.  The unemployment rate ticked up to 4.7%, matching the consensus.  Average hourly earnings rose 0.4%, above the consensus of 0.3%.  As a result y/y change was accelerated to 4.1% from 3.9%, showing that inflation risks have not gone away.  The report supports our view that the economy is not in recession.

If the Fed aggressively cut rates in September primarily due to the decline in jobs, then it should stand aside later this month.  But if they cut mainly due to the seizing up of the money markets, then it may have more work to do.

OECD:  Weakening U.S. Expansion Ahead

The OECD Composite Leading Indicator (CLI) for the U.S. decreased 0.7 points in August, the largest drop since February 2003, as CLI components such as stock prices, consumer sentiment, and dwelling starts tumbled.  The annualized six-month rate of change of the U.S. CLI slowed to 3.1%, the second successive decrease, and consistent with no better than trend growth.