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The latest economic numbers:


The October employment report was kinda' like kissin' your sister: a little tingle here and there, but not all that exciting (actually I never had any sisters!) The report did support the idea that modest U.S. economic growth is likely to continue with a lesser chance of a renewed recession.

The American economy added 80,000 net new jobs during October, less than the 100,000 net new jobs expected by forecasting economists. Better news saw the two prior months' job creation estimates revised higher, with a net gain of 102,000 additional jobs over the two-month period.

August employment gains were revised from 57,000 net new jobs (already revised once) to 104,000 jobs. Not bad for a month whose initial estimate on Sept. 2 was no change whatsoever in total employment. September's estimated gain was revised from 103,000 jobs to 158,000 jobs.

Still, the 80,000 net new jobs total in October was the weakest of the past four months. At the same time, the October gain was the 13th consecutive month of employment gains after 25 brutal months of job losses from early 2008 to early 2010. The 2.2 million net jobs gained since the beginning of 2010 offsets only one-quarter of the 8.8 million jobs lost during the Great Recession (see the kissin' your sister analogy?)

Better news saw the nation's unemployment rate decline slightly to 9.0 percent in October after being fixed at 9.1 percent the three prior months. The consensus view had the rate remaining unchanged. Still, the nation's unemployment rate has averaged 9.0 percent over the past three years, with only limited prospects of any sizable decline.

Most estimates of the unemployment rate on Election Day 2012 (now less than one year away) are between 8.5 percent and 9.0 percent. If I can offer this tidbit one more time - no sitting American President has been elected to a second four-year term in the past 75 years with an unemployment rate above 7.2 percent. Also as noted before, the President's focus now and likely throughout 2012 will be on a job creation agenda - it ain't rocket science.

With data as released last Friday, one might ask how a less-than-expected gain in jobs leads to an unexpected decline in the nation's jobless rate. The answer remains a tale of two surveys.

The "official" job creation number-in this case a net gain of 80,000 jobs in October-was derived from a survey of roughly 400,000 medium- and large-sized businesses operating within U.S. boundaries, known as the "establishment survey."

The unemployment rate comes from a smaller and usually more volatile survey of roughly 60,000 households. This survey in October estimated the labor force to have risen by 181,000 people, estimated total employment to have risen by 277,000 people, estimated the number of unemployed people to have declined by 95,000, and presto chango, a 9.0 percent unemployment rate.

Many practitioners of "the dismal science of economics" would suggest that the household survey is better at picking up changes in self-employment and the expansion or contraction of employment at very small firms than is the much larger establishment survey. Over time, the two surveys will typically move closer together.
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Jeff Thredgold
The Tea Leaf is a weekly economic and financial update by Jeff Thredgold, economist for Vectra Bank Colorado. He has been writing an economic update every week for the past 31 years and is the only economist in the world to have received the designation of CSP, or Certified Speaking Professional. Republished with permission from the Tea Leaf by Jeff Thredgold, whose site address is www.thredgold.com/html/leaf.html.

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