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Solid Jobs Report for November

The Bureau of Labor Statistics released a somewhat stronger than expected November jobs report Friday, with numbers more than solid enough to support a interest rate hike from Federal Reserve later this month.

New employment data shows employers in the United States adding 211,000 jobs last month. The report also shows the unemployment rate steady at 5% (a level previously not seen since April 2008). Economists were anticipating 200,000 payroll additions in November and for the unemployment rate to remain the same.

Revisions to the prior two months’ data were also net positive. Gains for October, initially recorded at a surprisingly strong 271,000 were revised even higher to 298,000. Meanwhile the September count was also revised higher to 145,000 from the latest reading of 137,000 jobs.

Net total job gains in September and October were therefore 35,000 greater than BLS previously reported. Monthly job gains over the last three months have averaged 218,000.

 

Chart Source: Forbes.com

Chart Source: Forbes.com

 

The Bureau of Labor Statistics released a somewhat stronger than expected November jobs report Friday, with numbers more than solid enough to support a interest rate hike from Federal Reserve later this month.

New employment data shows employers in the United States adding 211,000 jobs last month. The report also shows the unemployment rate steady at 5% (a level previously not seen since April 2008). Economists were anticipating 200,000 payroll additions in November and for the unemployment rate to remain the same.

Revisions to the prior two months’ data were also net positive. Gains for October, initially recorded at a surprisingly strong 271,000 were revised even higher to 298,000. Meanwhile the September count was also revised higher to 145,000 from the latest reading of 137,000 jobs.

Net total job gains in September and October were therefore 35,000 greater than BLS previously reported. Monthly job gains over the last three months have averaged 218,000.

Equity investors seemed unsure what to make of the news Friday morning, with the S&P 500 Index, Dow Jones Industrial Average and Nasdaq Composite each holding gains in the first moments following the BLS release but turning lower as the opening bell approached. The Dow and The S&P opened slightly in the red. Meanwhile, the yield on the 10-year Treasury note was at around 2.3% after closing Thursday at 2.18%.

In an interview Friday Michael Arone, a chief investment strategist for State Street, admitted being surprised by the bond market reaction, positing that perhaps the 10-year and 2-year Treasury notes made all the moves they were going to yesterday when Federal Reserve Chain Janet Yellen testified before Congress.

The monthly employment report typically drives the direction of trading the day of release, the confused response comes in the face of the Federal Reserve making it plain the only only economic catastrophe — a label for which this report does not qualify — would stop them from raising interest rates at their meeting later this month. In other words, the report was both a sign the labor market still has momentum (good) and a confirmation of policy expectations (certainty is good, but for stocks higher interest rates are often bad).

The state of the labor market is key in the Fed’s monetary policy equation and futures trading recorded by the Chicago Mercantile Exchange just before the release indicated that 79% of investors expect the Fed to move at it’s December meeting. “It’s almost certain the Fed is going to make a move. Everyone should buckle their seat belts,” quipped Andrew Chamberlain, chief economist at job site Glassdoor in an interview Friday.

Tom Porcelli, chief U.S. economist at RBC Capital Markets, argued last month that the November report would need to come in well below 150,000 or even 100,000 to halt Yellen and her team. The policy makers, he argued, were angling for a December hike even after a set of disappointing reports in August and September.

 

November_Unemployment_Rate_2005_-_2015_November_Unemployment_Rate_chartbuilder-1200x675

Chart Source: Forbes.com

 

Just Thursday Yellen told Congress: ”On balance, economic and financial information received since our October meeting has been consistent with our expectation of continued improvement in the labor market. And as I have noted, continuing improvement in the labor market helps strengthen our confidence that inflation will move back to our 2 percent objective over the medium term.”

In a note Thursday on the chair’s remarks PNC Senior Economist Gus Faucher wrote: “Yellen added a caveat that the FOMC will receive data before the meeting that could change the outlook; that includes the November employment report, to be released tomorrow. But her comments suggest that barring much weaker data over the next couple of weeks, the FOMC will raise the federal funds rate by 0.25 percentage point at its mid-December meeting.” He also reminded readers that the fed funds rate has been ear-zero since late 2008, and the Federal Open Market Committee has not raised rates since 2006.

Beyond the headline numbers the November report was solid, if unremarkable.

Average hourly earnings rose 4 cents in November to $25.25. The 12-month wage growth rate is therefore 2.3%. The workweek was 34.5 hours.

At the end of November 7.9 million Americans were unemployed, down 1.1 million year-over-year but little changes from October. In November there were 594,000 discouraged workers — people not currently looking for work because they don’t believe jobs are available for them and therefore are not considered unemployed — which is little changed from a year ago. The U-6 rate, which measures under-employment, came in at 9.9% in November versus 9.8% in October and down from 11% a year earlier. The employment-population ratio was steady at 59.3%. At 62.5%, labor force participation rate was up slightly.

 

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This thought piece is courtesy of Samantha Sharf, contributor to Forbes.com / Dec 4, 2015

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