We just received an across-the -board stronger-than-expected October employment report, with 271,000 jobs added during the month, more than double the downwardly-revised 137,000 jobs added during September.
Jobs growth was seen most sectors save manufacturing (flat) and mining (slightly down), with stronger job growth in service, retail, health care and construction. Year-over-year hourly wages moved up 2.5%, the strongest level since July 2009. The unemployment rate stood at 5.0% for October, unchanged from September as stronger-than expected job growth was offset by another 97,000 people exiting the labor force month over month in October. The net effect left the labor force participation rate unchanged at 62.5% in October.
The bottom line is job creation and wage growth was stronger than expected and that is likely to be a good thing for the domestic economy as we head into the year-end holiday season.
This should give retail stocks like Nike (NKE:NYSE), Under Armour (UA:NYSE) Amazon (AMZN:Nasdaq) and others a boost today. I expect more retail hiring as companies gear up for the holiday season and as encouraging as that might be, we have to remember that companies tend to shed those seasonal jobs in January.
As it relates to the stock market, I suspect we'll see the market trade down on this number as expectations slide more toward the likelihood of a December rate hike by the Fed. That's what the market is thinking today and it will likely weigh on higher-dividend-yielding stocks and prop up those for banks and other financial companies like Bank of America (BAC), Wells Fargo (WFC), TD Ameritrade (AMTD:Nasdaq) and others.
As we head into next week and beyond, we'll get far more data on the strength of the domestic economy and inflation. We have to remember that it takes more than one data point to confirm a trend. Looking at the sharp difference between the September Employment Report and the October one speaks to this.