JOBS/PAYROLL DATA: Sept Highlights Non-farm payroll: +103,000 (~40,000 over consensus) / Unemployment: 9.

1% (unchg) Private sector employment increased, esp. healthcare, service industry & construction Public sector employment continued to trend downwards. 45,000 telecom workers who were on strike in August have now returned to payrolls. Household Survey Data: Unemployed persons at 14MM, essentially unchanged (same w/ demographic breakdown) Involuntary part-time employment rose slightly to 9.3MM Discouraged worker count down 172,000 to 1MM on a year-to-year basis. LT unemployed now 44.6% of unemployment population (up from 42.9% in Aug), but labor force participation rate & employmentpopulation rate steady at 64.2% and 58.3% Establishment Survey Data Since April, NF payroll has increased by an avg of 72K/month, compared with 160K/month for the 7 months prior. Healthcare employment up 44K, construction up 13K, manufacturing down 13K, government down 34K, business services up 48K Avg workweek for private sector up 0.1 hour/mo (after -0.1/mo in Aug); factory OT also up by 0.1 hour/mo Private sector salaries up 0.2%, up 1.9% in the trailing 12mo Analysts (emphasis mine): general consensus likely no double dip recession, but nothing suggesting anything other than continued anemic growth. Factories and financial services firms trimmed headcounts by 13K and 8K, respectively. The drop in government employment during the reference period was entirely attributable to cash strapped municipalities (-35K), with most of the layoffs in local education (-24.4K). Brian Jones, Soc Gen In many respects, and slightly perversely, the markets would have preferred to have seen worse non-farm payroll figures. These numbers will take the pressure off Ben Bernanke for QE3 and remove a degree of urgency among US policymakers. That can only be a bad thing. Bear in mind, too, that these numbers include the return of Verizon strikers so a fair chunk of the 103,000 uptick is artificial. The key figure is the overall unemployment rate, which remains at 9.1%. That figure is seemingly immutable.

The real concern in the markets right now is the liquidity crisis in Europe and the US, so these more positive figures will have less of an effect than usual Marcus Bullus, trading director MB Capital A cautious optimism seems to have formed over the past week about the prospects for the US as GDP growth in Q2 2011 was revised up from 1.0% to 1.3%, and several indicators, including the ISM Manufacturing Survey, came in better than expected US policymakers have seemed more ready to stimulate the economy than their UK and European counterpartsBy putting the emphasis on jobs, President Obama is staking out a slightly different position to Chancellor Osborne, whose credit-easing announcement will try to influence the unemployment rate indirectly by increasing the growth rate of the economy. However, the world economic situation is so fragile at the moment that it is becoming more likely that additional cavalry will be needed, in whichever form it comes. Teodor Todorov, Centre of Economics and Business Research

Overall, this month's labour market report was as unexpectedly good as last month's was unexpectedly bad. This is still not a strong labour market, and the Fed will not be too fazed by this report, leaving QE3 as a likely result from the 2 November FOMC meeting. Rob Carnell, ING Financial Markets These figures are more or less what would be consistent over the long run with the underlying demographic expansion in the labor force. And, lo and behold, the unemployment rate has been remarkably steady since May, printing at 9.1% in four of the last five months. We are stuck in European growth limbo. Not weak enough to call it a recession, not strong enough to qualify as a healthy recovery/expansion. We are treading water (which I suppose is better than drowning!). Stephen Stanley, Pierpoint Securities The September data signal an economy neither reaccelerating nor shifting into recession. Looking into where the job growth was, not counting the returning workers, 50% was in health care, 20% in temporary workers and 15% in retail. These are not job categories reflective of a dynamic growing economy or even an economy turning in that direction, unless you consider dynamic growth the care and feeding of aging baby boomers. Steven Blitz, ITG Investment Research In absolute terms this is a weak jobs report but it is much less bad than expected. Private payrolls rose 137,000, better than the 97,000

average for the previous three months, with services doing most of the work, boosted by 45,000 returning Verizon strikers Temp hiring has rebounded in the past three months; usually means better permanent hiring ahead. Government down 34,000 but trend rate of decline is slowing. Ian Shepherdson, High Frequency Economics While it may help us to just barely escape a recession call, the gain in jobs and incomes is likely too little to blunt consumer pessimism. The main problem is that demand is simply too weak to support more robust job growth (more than 125,000 jobs per month). Employers are not going to step up hiring unless demand picks up. But consumers are not going to spend more until employment strengthens. There is no help on the way from monetary or fiscal policy, at the federal, state, or local level. This all adds up to a labor market that will continue to struggle to deliver even modest gains this autumn or winter. Kathy Bostjancic, The Conference Board Encouraging news came from the fact that the growth was led by the private sector, with government jobs falling 34,000, suggesting that increasing numbers of companies are expanding in the hope of stronger demand in coming months. Increased investment and hiring are key ingredients for the recovery to be sustainable, but those companies that have felt confident enough to boost capacity have been disappointingly thin on the ground so far this year. Chris Williamson, Markit So now that you are away from the ledge, what are you left with? We recognize that relative to the fear of imminent recession this smells like a positive, but the best you are left with is growth of about 1.5% (which is our forecast). In other words, you are left with flat out anemic growth. As we drill down into the detail, there were certainly some positives. We were encouraged to see average weekly earnings take back the entire decline from last month. Still, at 2.1% year-to-year they are flat to negative in real [inflation adjusted] terms. Tom Porcelli, RBC Capital Markets