The U.S. economy lost 190,000 jobs in October, higher than the 175,000 expected. Unemployment rate went up to 10.2%, the highest since 1983. This continued labor market weakness even in the face of an otherwise growing economy (the economy grew 3.5% in the third quarter) remains a major headwind at this stage of the economic cycle.
On the positive side, the number of jobs lost in October was the lowest since August 2008. Also, the previously reported August and September 2009 job loss numbers were revised upwards – a total of 91,000 fewer jobs were lost than originally reported.
The deceleration in job losses is clearly evident in the recent monthly payroll numbers, including this one, indicating that we may be nearing a turnaround in the labor market. My sense is that towards the end of the first quarter or the start of the second quarter of 2010, we should start seeing positive jobs numbers. But with more than 7 million jobs lost since December 2007, it will be a long time before we get anywhere near pre-crisis levels.
While the overall report today was not out of line with expectations, the headline unemployment rate topping 10% may spook the markets. We saw some decent retail sales numbers yesterday, albeit owing to easy comparisons, from a broad spectrum of retailers, from
Costco (
COST) to
Nordstrom (
JWN). The question is, can those improving retails sales trends remain in place with an unemployment rate of 10.2%? The answer to that question is far from certain at this stage.
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