My Nomination for an Emmy – The Upcoming VP Debate.

By David B. Armstrong, CFA | Oct 21, 2012 | Weekly Market Commentary

More on that below, but to start, I’ll address the employment numbers from last week.  They were good, but not great and they were not cooked.  Don’t fall for it – I don’t care who says what, I don’t believe that the job numbers were “cooked” in any way.

People who do believe that the numbers are cooked are probably the same people that think a U.S. submarine can fire off a Tomahawk missile and then keep the whole crew quiet.  If you need some good drama and conspiracy in your life, the new season of Homeland on Showtime just began, I highly recommend it.

First, in my predictions from last week, I said the non-farm payroll numbers would come in below the 113k expected.

I was wrong. 114k.

HOWEVER, I was correct about my football prediction as the mighty University of South Carolina Gamecocks decisively beat the #5 Georgia Bulldogs under the lights with a record setting crowd jumping in unison to the new $8m audio/video system pumping out some Sandstorm.  Too bad the new scoreboard broke in the middle of the game.

Oh well.

Here’s how markets finished the week.

Debates

This is not the venue for politics outside of the impact on the markets, but I will say that the upcoming Vice Presidential Debate could end up winning an Emmy for the Best Reality TV Show of 2012.  I expect this debate to be much more entertaining than an episode of Two Broke Girls, which probably seems more like a reality show to a lot of people these days than it does a comedy show.

Employment Reports on Friday

The unexpected drop in the jobless rate from 8.1% in August to 7.8% in September seems like good news on the surface for job seekers, many of whom have faced a steep uphill climb.  It’s certainly the headline grabbing number from data released on Friday.

Here’s where things get a little confusing.  There are actually two surveys that come out, the Household Survey and the Establishment Survey.

The Household Survey, which is the source of the data for the unemployment rate, measured an astounding 873,000 rise in employment and this is where a lot of the skepticism is coming from – ahem Jack Welch.  Of the 873k, 582k were classified as part-time.

The Establishment Survey recorded 114,000 new jobs of which 104,000 came from the private sector (that’s not a great number, by the way).  Digging beneath the surface of the data we see that of the 873,000 gain in employment, 582,000 were classified as part-time positions.  See below chart.

The people that think there is a conspiracy are having trouble reconciling the two reports.

The problem is that we need A LOT more jobs to keep up with the general population growth and there are a lot of people out there that certainly don’t feel very good even though 873,000 new jobs created.

As I’ve written about before, confidence has a lot to do with how much money people start spending.  That drop seen in the last 3 blue bars on the very far right of the above chart is not inspiring anyone. That blue line you see that is trending up is a function of the July number.  It’s going to start hitching down soon (look at the blue bars) and that’s not good.

I said last week to not hold your breath for the report to come in as expected – turns out I was wrong.

But here’s the problem as it relates to the market – the numbers were better but they still stink.  Anyone celebrating an unemployment rate of 7.8% is either dropping acid or running a campaign.  Weak hiring is a function of the amount of economic uncertainty we are currently experiencing.  Add to that an economy that is barely growing as well as a sharp drop in durable goods orders in August that underscores troubles among manufacturers and I just don’t see the U.S printing a whole lot of new jobs until there is a good economic plan put into place that stimulates growth – regardless of party.

Oh  – and if you made it this far, I predict that the Gamecocks beat LSU this Saturday even though we are 4 point underdogs playing at night in Death Valley.

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⁽¹⁾      West Texas Intermediate crude spot price is as of end of week.

⁽²⁾      London Bullion Market Association; gold fixing pricing at 3 p.m. London time.