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Pre-Market Primer: Job Creation Smashes Expectations; Unemployment Rate Falls


Everyone expected a post-Sandy slump, but this is a pleasant surprise for the US economy.


Job creation in the United States blew away expectations today.

According to the Bureau of Labor Statistics, non-farm payrolls rose by 146,000 last month. The unemployment rate fell to 7.7% from 7.9%, but the participation rate declined by 0.2 percentage points to 63.6%
Economists' consensus estimate was for a modest gain of 85,000 for non-farm payrolls after October's gain of 171,000. The uncertainty stemming from the impasse in negotiations over the fiscal cliff and a significant headwind from Superstorm Sandy were thought to have weighed on hiring.

"Hurricane Sandy made landfall on the Northeast coast on October 29, causing severe damage in some states. Nevertheless, our survey response rates in the affected states were within normal ranges," the BLS said. "Our analysis suggests that Hurricane Sandy did not substantively impact the national employment and unemployment estimates for November."

Since the storm ended, jobless claims spiked and remained elevated. The four-week moving average of jobless claims is still over 400,000. This week, ADP's estimate for private sector job growth last month was for 118,000, down from the previous month's figure of 158,000. The Challenger job cut report rose 34.4% over the same period last year, partly due to the storm and the Hostess bankruptcy.

Public sector employment declined by 1,000. Manufacturing and construction payrolls declined by 7,000 and 20,000, respectively. Retail jobs increased by over 50,000 for the second straight month. Health-care jobs increased by 22,000.

Futures contracts on the Dow Jones Industrial Average (INDEXDJX:.DJI) fell 0.12% to 13,047 before the opening bell today. S&P 500 (INDEXSP:.INX) futures dropped 0.16% to 1,410.70 and Nasdaq (INDEXNASDAQ:.IXIC) futures slipped 0.12% to 2,650.75.

The December preliminary reading of the University of Michigan Consumer Confidence survey will come out later this morning. Economists expect this to fall to 82 from 82.7 in November.

Shares of gun maker Smith & Wesson Holding Corp. (NASDAQ:SWHC) rose 2.55% after reporting fiscal second quarter earnings that exceeded estimates. The company also raised its full-year outlook.

Netflix (NASDAQ:NFLX) shares declined by 1.23% after the company disclosed yesterday that the Securities and Exchange Commission is probably going to sue it and CEO Reed Hastings over a July Facebook (NASDAQ:FB) post in which he said that Netflix streamed over 1 billion hours of content in the month before. The SEC is arguing that a Facebook post of material information is not a fair disclosure.

The euro slid 0.51% to $1.2904 today after Germany's Bundesbank said that the eurozone's troubles will have a bigger impact on Europe's largest economy than expected. Its expectation for growth this year was cut to 0.7% from 1% and for 2013, and it expects just a 0.4% rise in GDP. Previous predictions were for 1.6% growth. Unemployment may reach as high as 7.5% next year. Supporting this notion is today's report on industrial output, which unexpectedly dropped 2.6% in October. A decline of 0.5% was expected.

Austria's central bank also cut GDP forecasts today. The usually stalwart economy will grow by just 0.4% this year and 0.5% next year, according to the latest predictions.

Twitter: @vincent_trivett
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