News Focused on Elections and Labor Sector

John Smith
January 1, 2023
5 min read

The election certainly dominated the headlines throughout the week, while the labor sector was the main highlight of the economic calendar.

Diving Deeper Into Jobs Data for October

Jobs Report October 2020

The Bureau of Labor Statistics (BLS) reported that there were 638,000 job gains in October, which was right around market expectations. While these are important job gains to have, it's also important to put things in perspective, as we are still 9 million jobs short of where we were pre-pandemic.

Delving deeper into the numbers, there are two reports within the Jobs Report and there is a fundamental difference between them. The Business Survey is where the headline job number comes from and it's based predominately on modeling.

The Household Survey, where the Unemployment Rate comes from, is done by actual phone calls to 60,000 homes. The Household Survey also has a job loss or creation component, meaning it may be more reflective of actual job numbers, and the Household Survey showed there were a whopping 2.24 million job gains (as compared to the 638,000 job gains in the Business Survey).

The Unemployment Rate decreased from 7.9% to 6.9%, which was much stronger than expectations of 7.7%. And the decrease was for the right reasons. While there were 2.24 million job gains, the labor force increased by 724,000. Because there were so many more job gains than people joining the labor force, the unemployment rate moved lower.

It's also important to note that there has been a misclassification error where people were classified as absent from work for other reasons and not marked as unemployed on temporary layoff when they should have been. Without this error, the unemployment rate would have been 0.3% higher.

The all in U6 Unemployment Rate, which includes total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, decreased from 12.8% to 12.1%. Meanwhile, average hourly earnings increased 4.5% year over year, which was down from 4.7%. Average weekly earnings, which we focus on more, rose by 5.7%, up from 5.6%.

Private Payrolls Rise, But Sharply Lower Than Expected

ADP Employment Report October 2020

The ADP Employment Report, which measures private sector payrolls, showed that there was a gain of 365,000 jobs in October, far below the 643,000 new jobs expected and the lowest level since July. However, September’s report was revised slightly higher from 749,000 to 753,000 jobs added in that month.

Looking deeper into the report, services accounted for almost all the gains with 348,000. The hospitality sector added 125,000 jobs, while education and health grew by 79,000 and the professional and business sector added 60,000 jobs.

The bottom line is that after losing 19.7 million private sector jobs in March and April, we've since added back 9.6 million according to ADP. We still need to add 10 million private sector jobs to reach pre-pandemic employment levels.

The Caveat to Continuing Jobless Claims

Jobless Claims the Week of October 31, 2020

Another 751,000 people filed for unemployment for the first time during the week ending October 31, which is about the same number as the previous week. California (+152K), Illinois (+53K) and New York (+52K) reported the largest gains.

Perhaps the biggest news is the nice improvement in Continuing Claims, as people continuing to receive benefits fell by 540,000 to 7.2 million.

However, there is more to this headline number than meets the eye. Remember that when people run out of continuing benefits, they can apply for Pandemic Emergency Unemployment Compensation (PEUC), which extends their benefits another 13 weeks. And unfortunately, the number of PEUC claims increased almost 300,000 in the latest week. It's also unclear if people are in fact going back to work or just running out of benefits.

All in all, the bottom line is that the drop in Continuing Claims is certainly a step in the right direction, but it's not quite as strong as the headline would lead us to believe.

Home Prices Continue to Appreciate

CoreLogic released their Home Price Index report for September, which showed that home prices increased 1.1% from August and 6.7% when compared to September of last year. The latter reading is a big improvement from the 5.9% annual appreciation that was reported for August. The hottest markets in September were Phoenix (+11.1%), San Diego (+7.1%) and Los Angeles (+6.3%).

Looking ahead, CoreLogic has forecasted that home prices will rise 0.2% in the year going forward, which is unchanged from the previous report.

However, it's important to note that earlier this year CoreLogic forecasted a 6.6% decline in home prices in the year going forward, which they have since revised significantly. Given the strength seen in the housing market and the low inventory of homes available, even stronger levels of appreciation are certainly possible in the year ahead.

Update on Fed Meeting

The Fed held its regularly scheduled Federal Open Market Committee meeting, which was essentially non-eventful. The statement following the meeting was almost identical to the statement from the previous meeting, likely due to a desire to keep the status quo in the face of election uncertainty. Also of note, there was no mention of buying longer-dated maturity Bonds which, if the Fed chooses to do so in the future, could possibly support lower home loan rates.

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