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Jobs increase more than expected

The September jobs report was much better than expected, and upward revisions to past data wiped out the much-touted "zero" jobs number that was reported last month. But the best that can be said for private sector jobs is that they are growing at the rate of about 1% a month, and that's not enough to bring the unemployment rate down (it remained at 9.1%), nor is it enough to make anyone excited. But at least it refutes (as have lots of numbers of late) any notion that the economy is slipping into another recession.

Private sector jobs rose by 137K (vs. the 90K expected), according to the establishment survey. The household survey, in contrast, reported a very large addition of 412K jobs—which in the chart above you can see is basically "payback" for very large job losses in prior months. When you abstract from the monthly noise in both these series, you end up with growth that has been running somewhere in a annualized range of 0.7% to 1.4%. Call it 1.0%, or about 120K per month over the past two years. Not impressive, but nothing like a recession.

This chart shows that one of the healthiest features of this recovery continues: the public sector continues to lose jobs—about 600K since the recovery began. This is the most extended and the largest decline of public sector jobs since the 1980-82 recession. It is contributing to the unusually high and sticky unemployment rate, of course, but this is a good problem to have since the public sector had grown like Topsy in the years leading up to the last recession and needed to be cut back. A smaller public sector will eventually make it easier for the more-efficient private sector to grow.

Given the degree of pessimism embedded in the market (see yesterday's post for the gruesome details), today's jobs report should equate to a sizable positive shock. It shows the economy is still on a sustainable growth path, and growth is an important source of stability when the solvency of large borrowers (i.e., the PIIGS) is in question. The world as we know it is not even close to coming to an end.

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