U.S. Jobless Rate Drops to 7.8%, Stocks Rally

Arthi Gupta
05 Oct, 2012
New York City

September jobless rate fell to a 3-year low of 7.8% and total nonfarm payroll rose by 114,000. Stock indexes extended gains for the fourth day in a row after private sector added more jobs than anticipated. European markets are trading higher as the leaders of France, Spain and Italy meet.

[R]9:35 AM New York – September jobless rate fell to a 3-year low of 7.8% and total nonfarm payroll rose by 114,000. Stock indexes extended gains for the fourth day in a row after private sector added more jobs than anticipated. European markets are trading higher as the leaders of France, Spain and Italy meet.[/R]

U.S. indexes edged higher after better-than-anticipated employment data and an unexpected drop in the jobless rate.

The unemployment rate fell to the lowest since January 2009 as private sector and government added jobs in the month.

The private sector which has been growing since March 2010, increased payrolls by 104,000 in the month and the governments at all levels expanded by 10,000 staff after months of cutting.

In politically charged environment both parties are likely to exploit the latest and the last report before the Presidential election next month. President Obama is likely to point out the 24th monthly increase in jobs after the worst recession since the Great Depression and Republicans are likely to highlight the stubborn rate of elevated unemployment.

Separately, the International Monetary Fund lowered the global economic growth outlook for 2012 to 3.3% from 3.4%, according to the German business daily Handelsblatt.

In another report published by Handelsblatt, the Greek Prime Minister Antonis Samaras said the country will run out of cash in November if the next tranche of bailout fund is not released soon.

Samaras urged the European Central Bank to consider accepting lower interest rates on Greek debt holdings or rolling over its debt holdings to give more time.

In Asian news, the South Korean conglomerate Samsung estimates a surge in third quarter operating profit.

The Bank of Japan retained the benchmark overnight uncollateralized call rate at 0% to 0.1%. The board also decided to maintain the size of the asset purchase and credit facility at 55 trillion yen and 25 trillion yen respectively.

U.S. Nonfarm Payrolls Rise, Jobless Rate Drops

Total nonfarm payroll employment rose by 114,000 in September following an upwardly revised increase of 142,000 jobs in August, according to a report released by the Labor Department today.

Also, the unemployment rate measures in a separate survey dropped to 7.8% in September from 8.1% in August. The number of unemployed fell to 12.1 million, a decrease of 456,000 in September.

Jobs in manufacturing sector dropped 16,000 after falling 22,000 in August and construction sector expanded payrolls by 5,000. The number of temporary jobs declined 2,000.

The long term unemployment, those searching for jobs more than 27 weeks, was nearly unchanged at 4.8 million and represented 40.1% of the unemployed.

Earnings Review

Constellation Brands, Inc. ((STZ)), the wine and spirits maker reported second quarter net sales increased 1.2% to $698.5 million, from a year earlier. Net income in the quarter declined 23% to $124.6 million or 67 cents a Class A share compared with $162.7 million or 76 cents a share a year earlier.

PriceSmart, Inc. ((PSMT)), the membership shopping warehouse clubs operator reported September net sales increased 14.1% to $167 million, from a year ago. For the four weeks ended September 30, comparable warehouse sales open at least 13 1/2 full months increased 10%.

Samsung Electronics Co., Ltd., the South Korean conglomerate estimates third quarter operating profit to surge 91% to 8.1 trillion won or about $7.3 billion.

Zynga Inc. ((ZNGA)), the online social games developer expects third quarter revenue in the range of $300 million to $305 million and a net loss of between $90 million and $105 million or 12 cents to 14 cents per share.