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Farrell: Jobs Report Wasn't All That Bad

The employment report looked just awful on Friday and the market took a nose dive on the news. On that piece of news, and the word out of Hungary as well that they might be on shaky ground regarding their debt. Pull back the covers, though, and the news out of Washington wasn't all bad.

The headline number showed a jobs increase of 431,000, but 90% of those were temporary census workers. They will be laid off again in a few months, but at an average of $19 an hour, those jobs will help consumer spending a touch. I'm thinking of part-time work. I know I'm not worth $19 a hour, but maybe I could get away with it for a bit. The one prayer I say consistently is, "Please God, don't pay me what I am worth."

But there were 41,000 jobs created, and while that is a disappointment following last month's +218,000 and the month's before of +158,000, it still is 41,000 jobs. The better news was that "average weekly hours" in the private sector increased to 34.2 from 34.1 the prior month.

That doesn't seem like a big deal, but if hours worked had stayed the same, Brian Wesbury of First Trust Advisors figures 315,000 additional jobs would have been created. As he far more eloquently puts it, "Had employers kept hours per worker unchanged, there would have been enough labor demand for private payrolls to increase 356,000 (the actual gain of 41,000 plus 315,000).

That would have blown away the consensus-expected gain of 180,000. . . Given the massive health care entitlement enacted a few months ago, some companies may be taking rising labor demand and translating it into more hours for the workforce they already have rather than new employees, who come with higher fixed health care costs."

Average hourly earnings increased 0.3% and, when added to the increase in hours, should allow some measure of increased consumer consumption. It makes it very hard for those out of work if there is a structural shift to boosting hours versus hiring new workers, but total income should still go up. Wesbury figures average weekly earnings are up 5.3% at an annual rate the last three months.

The unemployment rate came down to 9.7% from 9.9% but that was just statistical (there are lies, damn lies, and statistics) since the work force allegedly fell by 322,000. I find it hard to believe that people looking for work actually fell.

The unemployment rate is calculated off the "household survey," which showed total employment fell by 35,000. But that follows a very big increase the prior month, and since this is a wildly volatile report, we shouldn't draw too many conclusions from one month's numbers.

As to Hungary's surprise announcement Friday, I guess we had to expect fallout from a surprising source. The Prime Minister's spokesperson, Peter Szijjarto, said his country's economic situation was severe and they are unlikely to meet budget deficit targets ordered by the International Monetary Fund.

The IMF stepped into Hungary in 2008 when they lost access to capital markets. Hungarian homeowners had borrowed heavily in euros and Swiss francs to buy houses and avoid the forint's high interest rates. That trade fell sour when the forint dove in value in 2008 and paying back the euro/Swiss franc borrowings became prohibitive.

But Hungary has its own currency and devaluation is an option. It remains to be seen, but another European country in some measure of distress is not helping the situation. I am still hopeful that we are in a correction that will find its bottom around 1040 on the S&P (we closed at 1064 on Friday). Corrections are terrifying and usually end quickly. Let's hope.

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