Merk Investments: Non-Farm Payrolls: September
The labor picture in September deteriorated well beyond market expectations. The net loss of -159K only partially accounts for the job destruction that was already well underway before the onset of the current credit crisis. The private sector saw -168K jobs lost during the month with the goods producing sector set a loss of -77, construction -35 and manufacturing -51K. The service sector saw a decline in jobs of -82K, with trade and transport losing -40K, financial services -17K, business services -24K and the leisure and hospitality sector reduced employment by -17K. Of the major employment sector only the health care and government sectors added jobs for the month by 25K and 9K respectively.
The household sector saw a net decline of -222K for the month, while the unemployment rate increased to 6.125% vs .the 6.055% recorded one month earlier. If not for a sharp decline in the labor force, the rate of unemployment would have seen another increase.
The reduction in employment during the month of September marked the single worst posting in five years. The non-financial corporate sector as been quite slow to respond to the deterioration in economic conditions. The payroll data provides the first real tangible evidence that the evolution of business conditions have changed to the point where it will be necessary for firms to step up the culling of their own workforce. This is a clear indication that the economy took a sharp turn down before the onset of the current phase of the credit crisis. Should credit markets remain dysfunctional, the rate of unemployment will move up quite sharply and we would expect to see fresh evidence of it in the initial claims data and in the October non-farm payrolls report.
Joseph Brusuelas
Merk Investments
Chief Economist/VP Global Strategy
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