Jobs Report: 'Things Are So Bad That This Looks Good'

October's employment reports showed continued sluggish job growth, but positive revisions for earlier months takes away some of the sting and reaffirms the economy is growing.

Career Fair
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Career Fair

The government reported 80,000 total jobs were addedin October. There were 104,000 private sector positions added in professional and business services, leisure and hospitality, health care and mining, and 24,000 government jobs were lost.

The unemployment rate fell slightly to 9 percent from 9.1 percent in September.

"We have to remind ourselves that things are so bad that this looks good. In the context of what we're living through, it's not a bad report," said Dan Greenhaus, global market strategist at BTIG.

There were a few positives in the report, including upward revisions to September and August payroll employment. August non-farm payrolls nearly doubled, from 57,000 to 104,000 and September was revised up to 158,000 from 103,000. "Rescued by revisions," writes Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi.

"It feels like there's more small business formation that's going on that's not getting reported right away. This is the second month in a row where we had substantial revisions," said Moody's chief economist Mark Zandi.

The average work week for private sector workers was unchanged at 34.3 hours, but the manufacturing work week rose by 0.2 hours to 40.5 hours, and production and non supervisory employees' work week rose by 0.1 hour to 33.7. Average hourly earnings for all private sector employees rose by 0.2 percent. "That's fodder for spending," said Zandi.

Zandi said, however, the positives have to be taken in the context of lowered expectations. He said the report shows the recovery has overcome obstacles and is showing resilience. "This is still too early whether to assess whether the coast is clear. Europe is still raging," Zandi said.

The highest monthly employment gain in the recovery so far was February, 2011 when 235,000 jobs were added, but job growth has been stubbornly slow and slowed to a trickle in the summer. Over the past 12 months, payroll employment has increased by an average of 125,000 per month.

This week, the Fed revised its economic forecast to include a high unemployment rate of through 2014, adding to speculation the Fed will do more easing in an effort to boost employment. Even in 2012, the Fed does not expect the unemployment rate to fall below 8.5 percent.

"We've been at 9 percent since 2009. This is a major problem," said Greenhaus. "Nine percent unemployment rate is damaging to the economy and (Fed chairman Ben Bernanke) couldn't have been clearer in the press conference (this week). He was specific. That you have to attack the unemployment rate while it's still attackable."

But maybe the Fed's help won't be needed.

"We don’t think there is much the Fed or the Obama Administration can do to speed this up. These private jobs would probably be a little faster at 180-200K per month if we had not had all these headwinds this year. And we are hopeful we will get there in the next several months. We don’t think it was an accident that the economy created over 200K jobs per month in February, March and April. We will get back there," wrote Rupkey.

"This labor market recovery is for real despite the economy having everything but the kitchen sink thrown its way," he notes.

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