The Labor Department's report of a 103,000 rise in payroll jobs in September along with a flat 9.1% unemployment rate exceeded analysts' expectations and lifted the stock market on Friday morning before prices started to drop in midafternoon trading.
The increase in employment partially reflected the return to payrolls of about 45,000 Verizon telecommunications workers who had been on strike in August, according to the U.S. Bureau of Labor Statistics report. In addition, job gains were seen in professional and business services, healthcare and construction. However, government employment continued to trend down.
"The number of unemployed persons, at 14.0 million, was essentially unchanged in September, and the unemployment rate was 9.1%. Since April, the rate has held in a narrow range from 9.0% to 9.2%, the bureau reported.
Stocks were higher in midmorning trading but back down again by midafternoon, with the Dow Jones industrial average down 34 points, 0.31% lower, at 11,089. The S&P 500 was down 11 points, 0.93% lower, at 1,153, and the 10-year Treasury bond was yielding 2.081%.
Analysts said the Friday jobs report suggests the U.S. economy is continuing its long, slogging upward climb—provided that market sentiment doesn't drag it down to recession level.
Disconnect Between Sentiment and Economic Activity
"The jobs report was pretty good," said Burt White, chief investment officer for LPL Financial, Boston, in a phone interview immediately following the jobs release. "We lost 8.5 million jobs in the recession and we've added 2 million back since March 2009. Clearly, a long runway is needed for job growth to improve, but relative to a market that is increasingly pricing in a near-done-deal recession, these are pretty good numbers that should take some air out of the recessionary balloon."
White pointed to a disconnect between consumer sentiment and economic activity. Consumers and investors are so fed up with Washington and Wall Street that their lack of belief is fueling the negative sentiment, he said. The danger: that negativity can lead to a recession.
While consumer fears are at an all-time high, retail spending is near the top quartile, with between 4% and 5% growth year-over-year in same-store sale spending, White noted. "Those two things can't stay different for long. We're still net 6 million jobs in the hole, which is why the employment rate is 9.1%, but if you look at the growth of jobs since the bottom, we've been decreasing the unemployment rate by about 1.3% in the last 18 months, which is normal. We wish it was more, but it's an average recovery coming out of a recession."
Steve Blitz, senior economist with ITG Investment Research in New York, wrote in an analyst note that the September data signals an economy that is neither reaccelerating nor shifting into recession.
