Positive Jobs Report Sets the Stage for December 14 Rate Hike
- Payroll Employment increased by 178,000 jobs in November.
- The Unemployment Rate for November dropped to 4.6 percent.
- Average Hourly Earnings decreased by 0.1 percent for the month, after a strong increase in October.
- Average Weekly Hours were unchanged at 34.4 in November.
Expectations for the official payroll job numbers for November were boosted by a stronger-than-expected ADP Employment Report released on Wednesday. We did not quite get there, but the 178,000 net new jobs added to the U.S. economy in November is a solid number. Moreover, the unemployment rate dropped more than expected, down to 4.6 percent from October’s 4.9 percent. This is the lowest unemployment rate seen since August 2007 and it puts us within putting distance of the low for the previous cycle of 4.4 percent, which we hit three times from late 2006 through mid-2007. The large drop in the unemployment rate came as the household survey of employment increased by 160,000 for the month, and the labor force decreased by 226,000 after falling by 195,000 in October. Despite the last two monthly declines, the year-over-year trend in the labor force is increasing, showing that the labor market is still broadening. Average hourly earnings dipped by 3 cents in November after gaining 11 cents in October. Over the previous 12 months, average hourly earnings were up by 2.5 percent. Average weekly hours were unchanged at 34.4.
Establishment data for November was mostly positive but there were a couple of head-scratchers. Mining and logging employment increased by 2,000 jobs with help from oil and gas extraction, consistent with a gradual increase in the rig count. Construction added 19,000 jobs. Manufacturing employment dipped by 4,000 jobs with losses in durable goods industries. Wholesale trade added 2,800 net new jobs. Retail trade surprisingly lost 8,300 jobs in November. Transportation and warehousing gained 8,900 jobs. Information industries dropped 10,000. Finance gained 6,000 jobs for the month. Gains in professional and business services were strong at 63,000 net new jobs. Education and healthcare added a solid 44,000 jobs. Leisure and hospitality served up 29,000 jobs. The government sector was strong, adding 22,000 net new jobs in November.
Labor market data looks good. We see no reason why the Federal Reserve will not follow through on the widely expected 25 basis point increase to the fed funds rate range on December 14. The fed funds futures market places the implied odds of a December 14 rate hike at about 95 percent.
Market Reaction: U.S. equity markets opened with gains. The 10-Year T-bond yield is down to 2.38 percent. NYMEX crude oil is up to $51.18/barrel. Natural gas futures are down to $3.50/mmbtu.
For a PDF version of this Comerica Economic Alert click here: employment-12-02-16.