Greater job creation and labor participation
The October employment was decidedly better than expected. Nonfarm payrolls increased 171,000 while the prior two months were revised up a net 84,000 jobs. The unemployment rate edged up to 7.9% from 7.8%, but due to “good” reasons as both the labor force expanded and household employment increased. Today’s report suggests greater momentum in the economy and puts upside risk to our forecast for Q4 GDP to increase 1.0%. That said, it does not change our Fed call. We continue to believe that the Fed is looking for a healthier recovery and needs to be convinced that the strength in the economy is sustainable. We look for QE to persist through most of next year.
Read the full report here.