NOVEMBER 2004

Strong Job Growth Bodes Well for Credit Quality

The U.S. economy's job creation engine has accelerated in recent months. According to new data from the Bureau of Labor Statistics, non-farm payroll employment rose by 337,000 new jobs in October, and the statistics for the prior two months were revised upward as well. Over the last 14 months, payroll employment has increased by 2.2 million new jobs. Despite the surge in new jobs in October (twice the number that analysts had expected), the U.S. unemployment rate remained virtually unchanged. But, this is because of a sharp increase in the size of the labor force. Analysts interpret this news as an indicator that job prospects have improved sufficiently to begin enticing discouraged workers back into the labor force as active job seekers.

Still another indicator of continued job growth is the most recent survey of the hiring plans of small businesses, conducted monthly by the National Federation of Independent Business (NFIB). Job creation plans are historically strong, "exceeded only by the insanity of the late 1990s" in the 30-year history of the NFIB surveys, according to NFIB chief economist William Dunkelberg.