Breaking Down the U.S. Employment Report

Here's what we learned by looking inside the jobs report
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The U.S, economy continued to generate jobs at a rapid pace in September, generating 661,000 new jobs. However, the figure feel short of estimates; analysts were expecting about 800,000 new jobs. 

Stock futures dropped on the news. Just prior to 9:00 A.M., futures for the Dow Jones Industrial Average anticipated an opening drop of about 500 points. 

However, a look inside the numbers paints a different picture. While that figure of 661,000 jobs created was disappointing, it is also misleading. 

The 661,000 figure includes the loss of 216,000 government jobs. While government jobs are important, they are not generated by the private sector, which is the "real economy". Because government jobs can be created at any time, regardless of economic conditions, they are not a reflection of the real economy. 

What this report does tell us is the U.S. private sector generated 887,000 jobs in September. That's an impressive figure, and it shows much less of a drop-off than the headline number. 

Not only that, the employment figures for August were revised higher. Last month, the Bureau of Labor Statistics reported that 1.371 million jobs were created in August. Today, that figure was revised upward to 1,489,000. That's a gain of 118,000 jobs on the August revision alone. 

The average number of jobs created by the U.S. economy over the past two months is 1.075,000. Over the past three months, that figure is closer to 1.3 million. 

Futures are down sharply in the wake of this report. When investors realize that the U.S. economy is cranking out jobs at a pace of over 1 million per month, and that the September figure was distorted by non-private sector jobs, I expect we'll see a bounce. 

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Ed Ponsi is the managing director of Barchetta Capital Management, and is the author of three books for publisher Wiley Finance. A dynamic public speaker, Ed has made appearances around the world, in such diverse locations as Singapore, Dubai, London, and New York. For more information about Ed and his work, click here.