Posted on November 24th, 2010
When the employment report for September was published it was generally perceived as showing that the U.S. employment situation is not improving or actually worsening. The contrary conclusion could however be reached from employment data from the household survey (See Employment Is Rising Fast) and from other indicators (See Follow up: Employment Is Growing Fast). On that basis one could also conclude that the stock market will break out of its three months trading range on the upside.
The October employment data indicated that our interpretation was right. Not only was the increase in payrolls (+151,000) much larger than average expectations, but prior months data were revised up (+110,000). More recent data also point to a stronger economy. Thus, the latest PMI index (Oct) and Philadelphia Fed manufacturing index (Nov) were up (chart 1). The Fed manufacturing production (Oct) and the Chicago national activity index (Nov) increased (chart 2) and most other regional Fed surveys were up. Retail sales were also stronger than expected. Finally, initial unemployment claims recently broke to the downside (chart 3). (more…)