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Job Growth Brightens But “There Are a Few Dark Clouds in This Picture”: Reinhart

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Friday's jobs report showed stronger-than-expected payroll growth of 171,000 in October, as well as upward revisions for the prior two months. Separately, the household survey showed an increase of 410,000, making September's big surge look less like an anomaly, much less a conspiracy.

Related: Jack Welch Defends His Controversial Jobs Tweet (Again)

Combined with the recent increase in consumer confidence and recovery in the housing market, the jobs report could give President Obama a modest boost heading into Tuesday's election.

Still, "there are a few dark clouds in this picture," says Vincent Reinhart, chief U.S. economist at Morgan Stanley.

First, the unemployment rate ticked up to 7.9% and the year-to-date monthly average of 157,000 payroll jobs is barely enough to keep up with population growth -- much less make up for the 8 million jobs lost during the Great Recession.

Second, the so-called real unemployment rate (U6) remains elevated at 14.6%, albeit down from 14.7% the prior month. Similarly, the labor participation rate is at 63.8%, up from its multi-decade low but still incredibly weak.

Third, average hourly earnings fell a penny in October and average hours worked fell to 34.4 from 34.5 in September.

Stagnant wages means "we're not generating income," Reinhart says. "That's a problem in terms of the durability of an economic expansion, which is usually fueled by consumption. To get consumption you've got to generate income."

Given that, Reinhart says the only way U.S. consumers can carry the baton for the economy is "only if the race is slow."

Indeed, Friday's jobs report is consistent with an economy that's growing around 2% or slightly less, the economist says. And there's risk of even slower GDP in the fourth quarter, "because of the uncertainty of fiscal policy and now because of disruptions associated with super-storm Sandy."

Related: Stronger Than Expected 3Q Growth Weak By Historical Standards: David Rosenberg

While the rebuilding process will perversely add to economic activity, it won't be enough to offset the hit to the nation's capital stock and the demand destruction that's resulted from the historic storm, Reinhart says.

In terms of the political impact of Friday's report, there's "something for everybody," Reinhart says. "That's the thing about a 30 page economic report, you can find talking points for any party," be it the strength in payrolls or the rise in the unemployment rate.

Partisans cherry-picking the data? About that, at least, you can be sure.

Aaron Task is the host of The Daily Ticker and Editor-in-Chief of Yahoo! Finance. You can follow him on Twitter at @aarontask or email him at altask@yahoo.com

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