Unemployment Rate Rises to 5.7%

The ISM manufacturing report also shows more signs of economic weakness, and gives the Federal Reserve reason to lower interest rates

Payroll employment fell by 5,000 in October, in line with market expectations of unchanged. The unemployment rate ticked up 0.1 to 5.7%, a bit less than the 5.8% consensus. The household survey showed a 271,000 drop in employment, reversing the jump last month; but this number is not trusted month-to-month.

Manufacturing employment slumped another 49,000 and construction was off 27,000, reflecting weather. Services jobs were up 70,000, including a 24,000 gain in government jobs. Last month's drop of 13,000 jobs was revised from the initial estimate of a 43,000 decline, again making the October drop hard to analyze.

Weekly hours dropped 0.1 to 34.1, reversing last month's rise. And hourly earnings were up 0.3%, in line with expectations.

Overall, it was a neutral report, with the upward revision last month and the lower-than-expected unemployment rate offsetting the drop in payrolls. However, we probably needed a positive surprise to prevent the Federal Reserve from loosening interest rates Wednesday.

ISM Manufacturing Index Falls

The October ISM Manufacturing Report on Business fell to 48.5% from 49.5% in September. The drop was near the consensus of 49.0. The West Coast dock strike had an impact, as the import component dropped 6 points. The strike probably affected other components, including inventories and orders. Export orders, however, were actually higher.

The index shows a contraction in manufacturing for the second consecutive month, but remains consistent with growth of the overall economy. The data again point to the Fed loosening rates Wednesday.

From S&P MarketScope

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