November 5, 2004 9:39 a.m.
Friday’s report showing nonfarm payroll growth of 337,000 jobs in October was well above of most economists’ expectations. Here’s what economists are saying about the data and what they mean for jobs, growth and interest rates.
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These numbers make it very tempting to call the end of the soft patch but we are reluctant to do so. First, there are clear post-hurricane effects in the numbers, with construction up 71,000 compared to an average of 11,000 in the previous three months. There was also a 103,000 rise in education/health/government jobs, which are not the core of the wealth-creating economy. The real test for payrolls will come over the next couple of months, as the hurricane effect fades.
— Ian Shepherdson, chief U.S. economist, High Frequency Economics
The soft-patch of activity from the early summer is now officially over. … Sluggish employment gains were behind market speculation that the Fed would pause in its measured rate-hike plans. This considerably stronger employment evidence re-affirms our view for uninterrupted measured rate hikes until mid 2005.
— Stephen Gallagher, chief economist, SG Corporate & Investment Banking
December [interest-rate] tightening is a good bet if economic data stay firm, although it is still not a sure thing. There are, after all, still six weeks of data before the Dec. 14 FOMC meeting.
— Joshua Shapiro, chief U.S. economist, MFR Inc.
The employment picture is completely changed with this report. Payroll employment is once again rising at a pace above 200,000, which should be sufficient to bring the unemployment rate down further over the next few months. We think perceptions of the strength of the economy will be revised up in the wake of this report.
— John Ryding, Conrad DeQuadros, Elena Volovelsky, of Bear Stearns
The official unemployment rate held near its lowest level of the post-recession period. However, alternative measures of labor market utilization indicate that there is still a lot of slack. So far, job creation is simply not rapid enough to absorb all of the potential labor resources. The economy needs to grow still faster to utilize the available labor resources.
— Steven Wood, Insight Economics
Source: Economists React
Wall Street Journal November 5, 2004 9:39