October’s nonfarm payrolls: 204000

The nonfarm payroll is an important statistic for United States. It is usually reported monthly on the first Friday of the month, but because of the government shutdown in October it was reported this time on the second Friday of November. It accounts for approximately 80% of the workers who contribute to the GDP of the United States, and as such is a key economic indicator of the health of the economy.

The nonfarm payroll is reported by the US Bureau of Labor Statistics, and it reflects the total number of paid workers in any business with certain exceptions – farm workers, as they are often seasonal; private household employees; general government employees; and employees of non-profit organizations that provide help for individuals.

The numbers came out unexpectedly high at 204,000 jobs created for the month of October. The economists had predicted about 120,000, given the slowing in the economy caused by Washington. Despite this, the unemployment rate ticked up slightly to 7.3%, which was as expected. Some analysts question the numbers. Moody’s economist Mark Zandi said, “I find this bizarre, I wouldn’t be surprised if this gets revised to some degree… down.”

The figures are always subject to interpretation. The household survey which is part of the report showed that employment actually fell by 735,000 for the month. It is thought that this is because of the furloughed government workers who would be counted as temporarily unemployed in the household survey, even though they are counted as employed in the nonfarm payroll count.

Another surprising statistic is that previous month’s figures were revised upwards. Hiring for August and September was revised up by a total of 60,000, adding to the generally upbeat tenor of the report.

Good nonfarm payroll numbers are a mixed blessing for the US economy. Although they represent a strengthening of the economy overall, they may impact the Federal Reserve Board’s current policy of low interest rates and buying back bonds. This policy has been widely credited with the continued optimism in the stock market.

The figures gave the 10-year Treasury interest rate a boost from 2.6% up to 2.73%, the highest it has been since mid-September. Further pressure on the bond buybacks has come from the strong growth figures for the third quarter of the year, which were an annualized rate of 2.8%. However, the stock market managed to sustain modest gains on the announcement.