Employment in September rose more than expected. Very encouraging development. Highest Y-o-Y gain since 2007. A 9.1% unemployment rate suggests low risk of recession. It is historically consistent with accelerating growth in nominal GDP.

The total number of employed rose by 103k in the Establishment Survey and by 398k in the Household Survey released by the BLS.  The Household Survey gain is the best since Jan. 2010 and second best since Nov. 2007.  Remarkably, the Household Survey gain of 691k new jobs over the last 90 days is the best since April 2010.  You would never have guessed that degree of strength in jobs – and it has gotten stronger sequentially for 3 months – given the absolute despair expressed in consumer and investor sentiment over the same period.  What does this mean?  It means the underlying economy is in better shape than the sentiment and stock market indicators suggest.  It means the recent panic attack in the markets has been driven by psychological factors such as fears of a European financial meltdown and continuing political theatre in Washington.  Something to keep mind – recessions start when the unemployment rate is low- not high as it is now.  Nominal GDP growth is normally over 25% FASTER when the unemployment rate is above the average rate of 5.8% since 1948.  Nominal GDP has grown 50% faster than average when the unemployment rate has been above 9%.  Jeb Terry, Sr. Oct. 7, 2011

 

Aberdeen Investment Management – a guide service for micro-cap technology investment

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