Strength in the service sector

Job growth in October exceeded expectations as the Labor Department announced a better than expected 166,000 gain in nonfarm payrolls, the sharpest increase in five months, and the unemployment rate held steady at 4.7 percent.
Strong gains in both services and government jobs handily offset declines in both manufacturing and construction.

Job creation in Professional and Business Services rose by 65,000 (mostly temporary help), 45,000 jobs were added in the Leisure and Hospitality category (mostly food service), Education and Health Services added 43,000 spots (mostly ambulatory and health care), and Government payrolls increased by 36,000 (mostly at the local level).

Manufacturing lost 21,000 jobs (split evenly between durable goods and nondurable goods) and construction payrolls declined by 5,000, led by a loss of 21,000 jobs in residential construction that were only partially offset by an increase of 15,000 in non-residential construction.

It is hard to argue with the relative strength of the labor market as indicated in the monthly payroll report - there are few anecdotal accounts of widespread distress and both the ADP payroll data and weekly claims for unemployment insurance are consistent with the nonfarm payrolls data.

Downward revisions to prior data due to benchmark revisions of the birth/death model have already begun and will likely continue for the next few years, so current job creation totals will probably move lower - how much lower is anyone's guess.

Tuesday's report on consumer confidence showed a continuing decline in the number of respondents saying that jobs are plentiful and an increase in those saying saying that jobs are hard to get, but the job outlook remains positive by a narrow margin.

Similarly, initial jobless claims have been rising slowly in recent months but remain well below levels that, in the past, have been indicative of stress in the labor market.

Can you really run an economy with food service, health care, and government as the primary sources of job creation?

Apparently you can.