Payrolls surprise to the upside

Oct Payroll growth was well above expectations at 171k, 184k of which were in the private sector (vs 158 in ADP). The estimates were 125k headline and 123k private sector. The two previous months were revised up by 84k. The Household Employment survey rose by 410k after the gain of 873k in Sept but because of an increase in the labor force of 578k, the unemployment rate rose to 7.9% from 7.8%. The U6 did tick down to 14.6% from 14.7%. The participation rate did rise to 63.8% from 63.6% but the avg duration of unemployment rose to 40.2 weeks from 39.8, the highest since Dec ’11. Also of note, avg hourly earnings were flat m/o/m instead of gaining .2% as expected and were up 1.6% y/o/y, below the rate of CPI. Bottom line, the number was a pleasant surprise as the private sector gains were the best since Feb. A factor in the upside was in mfr’g as 13k jobs were created vs the expected decline of 5k. The job gains were broad based in the private sector and we again saw declines in gov’t jobs. ADP claims that its number of 158k will equate to the 3rd revision to today’s # of 184k. We’ll see over the next few months but at least ADP got the trajectory right this time.

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