NEW YORK - The household unemployment rate rose to 10.2 percent, highest in 26-1/2 years, as employers shed 190,000 in nonfarm payrolls in October, the Labor Department said on Friday.
KEY POINTS: * The Labor Department said the unemployment rate was the highest since April 1983. * Analysts polled by Reuters had expected payrolls to drop by 175,000 and the jobless rate to edge up to 9.9 percent from 9.8 percent in September. * The labor market is being watched for signs whether the economic recovery that started in the third quarter can be sustained without government support. The economy grew at a 3.5 percent annualized rate in the July-September period, probably ending the most painful U.S. recession in 70 years. * Payrolls have declined for 22 consecutive months now, throwing 7.3 million people out of work since December 2007, when the recession started.
ANNA PIRETTI, SENIOR ECONOMIST, BNP PARIBAS, NEW YORK
It's pretty much in line with our expectations. I think it really doesn't change the trend. We have seen an improvement overall in the pace of job losses. What's different is that this improvement is coming at a slower pace than perhaps the market was expecting.
But there's still a lot of fragility and negative signs in this report. If you look at the household employment, that was showing large job losses. What's worrying is that a couple of months ago the survey was really in line with payrolls, both were showing an improvement in the pace of job losses. But over the past few months, it's actually been surprising on the downside, and showing a bit of a reversal.
The large decline in the household employment was also responsible for the large increase we saw in the unemployment rate, and that was negative... so clearly a lot of deterioration there.
Another thing that surprised me was hours worked, that was unchanged... That's worrying, although we have had an improvement in productivity, firms are not increasing their hours. But until we have increasing hours we are not any seeing benefits for the consumer.
DAVID ADER, HEAD OF GOVERNMENT BOND STRATEGY, CRT CAPITAL
GROUP, STAMFORD, CONNECTICUT:
There is little encouraging in this report and undoubtedly the move to 10.2 percent for the unemployment rate will be the thing that captures most attention. The average hourly earnings gain was okay, less so on a year-over-year basis. In short, this report should add to economic worries about the fourth quarter, even if the nominal job losses were merely as expected and the month-over-month losses are slowing.
PETER CARDILLO, CHIEF MARKET ECONOMIST, AVALON PARTNERS, NEW YORK:
Obviously it was a little bit disappointing, the highest rate in 26 years, but the trend is that the economy is losing less jobs is still in place, and that's the bright spot. But it is a little bit disappointing that we went above the 10 percent line.
It strengthened the hands of the Fed, obviously, they did speak about the low rates of resource utilization... the numbers strengthen their hands.
After a big rally yesterday, the unemployment numbers could provide reasons to take some profit off the table today. But while the headline numbers look horrible, the report itself was not all that bad.
NIGEL GAULT, CHIEF U.S. ECONOMIST, IHS GLOBAL INSIGHT, LEXINGTON, MASSACHUSETTS
People were hoping that there would maybe an upside surprise to this, because there had been some better news recently, and they were hoping for some follow-up.
What's happened is it's come out worse, so that's caught them on the wrong foot. They were leaning one way, and its gone the other. Remember, we had a huge run-up in the market yesterday, a lot of optimism. So this throws a bit of cold water on that.
Unemployment rate, 10.2 percent. That's a really horrible number. The payroll jobs, maybe not quite as bad as you might think just from the headline, 190,000, compared to consensus. So it's not a lot worse. Previous two months were revised up, It's not good, but it's not disastrous.
CARMINE GRIGOLI, CHIEF U.S. INVESTMENT STRATEGIST, MIZUHO SECURITIES USA, NEW YORK:I don't think this is materially different from what people were expecting. The market is moving on a lot of factors, including a rally we had yesterday. The numbers are going to encourage more profit-taking but I don't see a dramatic move because if you take last month's numbers that were revised up... the net increase last month was about 50,000 jobs, and this month is 15,000 less than expected. So when you put those numbers together, it's not that different from expectations. The manufacturing sector payroll is surprisingly weak, but we had recently purchasing manager service which suggested that employment in he manufacturing is improving.
ADAM YORK, ECONOMIST, WELLS FARGO SECURITIES, CHARLOTTE, NORTH CAROLINA:
An unemployment number above 10 percent is more of a headline psychological blow than anything else. Overall the report was largely in line, but a little worse than expectations. The big net revision, however, tempers the headline. The Fed hopefully can look through the headline nature of 10 percent and they are obviously mindful of where the economy is. Clearly the Fed is on hold, but the unemployment rate was a psychological blow. The average weekly hours did not come up. An increase in average weekly hours typically precedes lower unemployment.
TOM SOWANICK, CO-PRESIDENT AND CHIEF INVESTMENT OFFICER,OMNIVEST GROUP:
I think the revisions in this report today -- down negative 219,000, instead of negative 263,000 -- is consistent with the improvement in initial unemployment claims. Average hourly is also healthy, rising 0.3 percent. The headline number, which is the unemployment rate of 10.2 percent -- is problematic because it gives a sense of urgency to Washington, D.C. Washington will be looking for any increase in stimulus just as the unexpected decline in new home sales did for Congress when it extended the $8,000 home credit.
DAVID RESLER, CHIEF ECONOMIST, NOMURA SECURITIES INTERNATIONAL,NEW YORK:
The headline non-farm payrolls was pretty much in line with our expectations. Our expectation was 185,000 so this was pretty close. The thing that the media is going to jump all over is the unemployment rate, and that is really quite disheartening.
We don't see the Fed doing anything before the early part of 2011, and this simply reinforces that point.
KEITH HEMBRE, CHIEF ECONOMIST, FIRST AMERICAN FUNDS, MINNEAPOLIS:
I wouldn't question whether the trend in job losses is improving, I think it absolutely is based on the jobless claims data, I question whether or not it's quite as good as the payroll numbers would suggest.
I don't know how in the heck the Fed could justify tightening policy with the unemployment rate over 10 percent unless we have an imminent inflation danger, which based on everything I see is absent.
CHRIS BURBA, SHORT-TERM MARKET TECHNICIAN, STANDARD & POOR'S, NEW YORK:
Stock index futures are dropping a fair amount in response to the report and Treasuries are rallying. The next question is what this means. The market has recovered since the November 2 lows, suggesting that the decline from October 21 was perceived as a dip and attracted buyers. So long as those lows are not undercut, the path of least resistance should remain to the upside.
RICHARD FRANULOVICH, SENIOR CURRENCY STRATEGIST, WESTPAC, NEW YORK:
It's a disappointing report because jobless claims were trending lower and the U.S. GDP grew more than 3 percent in Q3. Job losses were pretty broad-based too, plus we have unemployment rate at more than 10 percent. So job losses are not moderating as quickly as I had hoped despite those earlier indicators on jobs. It's pretty disappointing overall and that's why we're seeing the euro and dollar/yen fall.
JOSEPH TREVISANI, SENIOR MARKET ANALYST, FX SOLUTIONS, SADDLE RIVER, NEW JERSEY.
Should be good for the dollar on risk aversion trade. The Fed will stay on hold even longer with less likelihood of giving a concrete answer to when and how to withdraw quantitative easing. The revision is good but the real shocker is the unemployment rate.
DAN COOK, SENIOR MARKET ANALYST, IG MARKETS, CHICAGO
The headline number looks pretty good, relatively, but the 10.2 percent unemployment will be a shock for the market to digest. One of the things I'm not positive about is that we're staying flat in workweek hours. At some point, we need to see that tick up. No recovery is possible until we get jobs back.
The 10 percent level is more a psychological level than anything else, and I think it will lead to some selling pressure. However, lately, the initial reaction will be a sell-off, then by the end of the day we'll see little change.
MARKET REACTION: STOCKS: U.S. stock index futures turned negative. BONDS: U.S. Treasury debt prices rose. DOLLAR: U.S. dollar stemmed losses vs. the yen and gained against the euro.