Another day for optimism, I guess, as several good economic reports showed up over the past couple of days.
First, employment. I’m speaking this afternoon at our National Conference about why I expect employment to continue to rise—potentially with increasing strength—and the numbers this morning support my case. Total non-farm employment grew by 171,000, well above expectations of 125,000, and the prior two months were revised upward by 84,000. The U-3 employment rate actually rose, from 7.8 percent to 7.9 percent; that’s a good thing, as it was driven by people starting to look actively for jobs again. The U-6 series, which includes a wider range of people un- or underemployed, and which I think is a much better indicator, dropped from 14.7 percent to 14.6 percent—another good sign.
Overall, employment is coming back. The employment-to-population ratio just hit a three-year high, and the participation rate rebounded to a four-month high. Make no mistake, these numbers aren’t where they should be—we’re still at very poor levels overall—but the trend is in the right direction.
Consumers seem to agree, as consumer confidence rose to an almost five-year high, as measured by the Conference Board. Consumers are also voting with their wallets: housing sales continue to rise, as do auto sales. The Wall Street Journal reported today that October auto sales were up 7 percent, which was actually lower than year-to-date figures due to Sandy.
Because they are long-lived investments made with financing, housing and autos are key indicators of consumer confidence. You have to be confident in the future to take on that kind of commitment, and the conjunction of the improving surveys with the actual sale statistics provides more support to both.
Banks are also starting to move. The Federal Reserve’s Senior Loan Officer Survey reports that banks are now more willing to lend, and credit standards have been eased. Consumer credit outstanding (the money people have borrowed to buy stuff) has also started to tick up again—another supporting indicator for confidence.
I’m working on a long piece about why employment may come back faster than most people now expect, which I plan to start posting in sections next week. If I’m right, it will only provide more support for what is increasingly starting to look like a self-sustaining expansion.