The Market Today

November Jobs Data Blow Out Expectations

by Craig Dismuke, Dudley Carter


Payroll Growth Blows Out Expectations and Unemployment Rate Drops to 3.5%: The November jobs data were quite strong but not sufficient to change the calculus on monetary policy.

Nonfarm payrolls grew 266k for the month, well above the 180k expected by economists.  The headline figure was boosted by a 54k rebound in manufacturing jobs as the UAW strike came to a conclusion.  In addition to the strong November figures, the previous two months’ reports were revised up 41k cumulatively.  The soft 128k payrolls added in October was revised up to 156k. The 3-month average is now up to a stellar 205k, the best rate since January.  The average rate of payroll growth for all of 2019 has now increased from 167k to 180k.  Across the board, the payroll figures are strong and indicate that the labor market is not slowing as acutely as it appeared.

In the Household survey, the unemployment rate ticked down from 3.56% to 3.53%, enough to drop the rounded rate from 3.6% to 3.5%.  The report showed 135k more people reporting as not in the labor force, only 40k additional persons were added to the labor force, and 83k more people indicated that they were employed.  While only a small gain in November, the labor force has grown in each of the last seven months, marking the longest consecutive influx of workers into the labor force of this cycle.  The amount of slack in the labor force decreased as those employed part time for economic reasons dropped 116k after rising 454k from July to October.  The number of long-term unemployed fell 40k.

As for earnings growth, November saw a mild 0.2% gain but previous revisions higher showed a firmer pace of earnings growth coming into the month.  October’s 0.2% gain was revised up to 0.4% and the year-over-year rate of growth is now up to 3.1%, above expectations of 3.0%.  After the wage revisions, annual wage growth for nonsupervisory workers has registered its strongest readings of the cycle in the last two months.  Average hours worked held steady at 34.4.

Bottom Line: Nonfarm payroll growth has now proven to be holding up quite well despite increased uncertainty.  Previous signs of slowing have been attenuated by the November strength and revisions.  The household report continues to show signs of a tightening labor market.  Earnings growth is holding in just above 3.0% and does not show signs of softening.  Despite all of this, the Fed is waiting for evidence of a sustained increase in inflation before considering tightening policy.  This report will not change the outlook.  If anything, it lessens the chances of a rate cut in the short term. 

Consumer Confidence and Inventories: At 9:00 a.m. CT, the University of Michigan will release its preliminary report on consumer confidence for the month of December.  Also at 9:00 a.m., the October wholesale inventories data will be revised.


Market Sentiment Improved on Good Data as Investors Kept an Eye on Trade: After slipping early and spending most of the day in negative territory, U.S. equities finished Thursday with modest gains. Alongside the recovery in equities, Treasury yields slowly edged higher in the afternoon. The eventual recovery followed some upbeat economic data earlier in the day, was briefly interrupted by another negative trade headline, and preceded this morning’s key update on the U.S. labor market. The trade deficit shrank more than expected in October and initial jobless claims fell back to their third-best level since 1969. Later, revisions confirmed the strength in business equipment investment in October reflected in initial estimates released a week ago. Capital goods shipments rose an unrevised 0.8% to start the fourth quarter while the gain for orders was trimmed by 0.1% to a still-solid 1.1%. With a sharpened focus on trade, an afternoon report from Dow Jones that the U.S. and China “remain at odds over the value of farm goods” purchases briefly, but ultimately unsuccessfully, dislodged both from their uptrends. The 2-year yield ultimately closed 2.0 bps higher to 1.59% and the 10-year yield added 3.6 bps to 1.81%.


Strong Jobs Data Sends Stocks and Yields Higher: In the lead up to this morning’s jobs report, U.S. equity futures had turned higher as indexes across Asia and Europe gained while Treasury yields had edged lower in a modest drop globally in yields. The broadest indexes tracking equity gains across Asia and Europe were both 0.4% firmer around 7 a.m. CT while contracts on the S&P 500 had notched a smaller 0.2% improvement. The 2-year yield had declined 0.8 bps to 1.59% as the 10-year yield dropped just over 2 bps to 1.79%. While the net moves were modest, there was a sharp shift evident at midnight on the intraday charts. China’s Ministry of Finance said in a statement that it was beginning to waive tariffs on certain purchases of U.S. pork and soybeans based on applications it received from domestic enterprises. U.S. agricultural goods remain a key hang-up in negotiations of a trade deal. After the surprisingly strong labor data showed the jobs market remains hot, S&P 500 futures doubled their gains and Treasury yields reversed higher. The 2-year yield was 4.7 bps higher at 1.64% after the released while the 10-year yield jumped a similar 4.2 bps to 1.85%, a three-week high.

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