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By Jeremy Glaser and Robert Johnson, CFA | 11-07-2014 10:00 AM

Job Report Shouldn't Be a Disappointment

Despite missing overly rosy estimates, October's employment report is in line with recent trends, says Morningstar's Bob Johnson.

Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. The U.S. economy added 214,000 jobs in October. I'm joined by Bob Johnson--he is our director of economic analysis--for his take.

Bob, thanks for joining me.

Bob Johnson: Thanks for having me.

Glaser: This 214,000 number was below consensus, although right on the money where you expected it. Why was this so much lower? Is this a worrying number? Or did the consensus just get carried away?

Johnson: I think the consensus got carried away on the number. I think the 214,000 is still a very good number. The average over the last 12 prior months was 222,000 jobs added. So, clearly, it's not very far off the average, a very acceptable number. Especially given the 250,000 plus jobs we had the month before, a little backing and filling is pretty typical. So, I've tried to prepare everybody that this wouldn't be as great a number as some people thought it was going to be, but it's certainly a very acceptable number. It's very consistent with my 2% to 2.5% GDP growth forecast overall.

Glaser: How about the unemployment rate at 5.8%? Is that falling for the right reasons or are people dropping out of the labor force?

Johnson: This time, the Household Survey actually showed more growth in employees than the headline business numbers that we all are used to looking at. So, the reason the unemployment rate fell this time was because we added so many jobs according to that Household Survey. So, that's really great news.

Glaser: So, when we look at the sectors, where are these jobs added? Were they added in places that were higher-paying jobs?

Johnson: Unfortunately, the mix of jobs is a little bit lower quality this time around. The biggest growth category was leisure and entertainment. And of that, the restaurant work was probably the strongest, and that was the biggest category this month. Manufacturing and construction were both just a little soft relative to where they've been, so that wasn't so good. Business and professional services, which has been a real barnburner, had a not-so-good month this time around. And the temporary help part of the survey was actually quite a bit lower than trend, which is not good because it's usually a pretty good predictor of what's ahead for us.

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