November Jobs Report: Everything You Need to Know * * * * *
Yes, it was that time again, folks. It’s Jobs Friday, when for one ever-so-brief moment, the interests of Wall Street, Washington and Main Street were all aligned on one thing: jobs.
The Bureau of Labor Statistics said nonfarm payrolls increased by a seasonally adjusted 211,000 job in November. The unemployment rate was unchanged at 5%, reflecting an expansion in the labor force as more Americans came off the sidelines and began searching for jobs. Economists had been expecting 200,000 jobs and 5%. The consensus seems to be that the report gave the Fed plenty of reason to raise rates later this month.
Here at MoneyBeat HQ, we crunched the numbers, tracked the markets and compiled the commentary before and after the data crossed the wires. Feel free to continue the conversation in the comments section. And while you’re here, why don’t you sign up to follow us on Twitter.
Here’s how it all went down:
Before Thursday morning, today’s jobs report was seen as an afterthought. Sure, every month there’s this hype about “the most important jobs report ever,” or some such, but this month it didn’t have that weight at all. The Fed was set to raise rates, everything was lined up. The jobs report would have to be a total disaster to change that.
Then the ECB happened.
The market seems to have gotten its feet back under it after yesterday’s Draghi surprise. Dow futures are up about 30 points, and S&P futures are up about 4. The yield on the U.S. 10-year Treasury note’s come in a hair, at 2.31%. The euro’s down about 0.5% to the dollar, and oil is up 1.3%.
Still, a lot of damage was done yesterday, both on the charts, and in people’s perceptions. If the ECB can’t deliver, can the Fed really start raising rates? It can if the economy justifies it, and that’s where this report comes in. Suddenly, this report matters again.
Analysts estimate payrolls expanded by 200,000 in November. Fed Chairwoman Janet Yellen told lawmakers Thursday that payroll gains of fewer than 100,000 are needed to absorb new entrants into the labor force and that fewer than 200,000 new jobs a month are needed to bring the jobless rate down further and draw discouraged workers back into the labor market. November payroll gains of even 50,000 would still leave the three-month average at more than 150,000 and it would leave the 12-month average above 200,000. In other words, it would take a very big miss on job growth to change the Fed’s view on job growth, and, again, a very big miss might be seen as anomalous.
In short, if the numbers are anywhere near consensus Friday, the headline from the jobs report is likely to be that the Fed is on track to raise short-term interest rates on December 16.
In our Morning MoneyBeat column today, Mark Hamrick of Bankrate said we’d need to see something substantially below 80,000 for the Fed to hold off. “And even then, I’m not sure we’d avoid a December rate hike.”
“The books aren’t going to be rewritten on any of [the numbers],” said Mr. Hamrick, senior economic analyst at Bankrate. “It’s the trend. The single set of numbers we’ll be getting for November cannot radically change the trend.”
After two months of lackluster job gains, the October jobs report offered the healthiest number so far this year: 271,000 jobs, which helped boost the monthly average to 206,000. Economists don’t think employers kept up that pace last month, though hiring data released Wednesday by payroll processor ADP suggests the number could be better than expected. Even if payrolls disappoint, they would have to be pretty terrible to dissuade Fed officials from a rate increase.
The odds of this report coming in so bad that it actually changes the economic picture are low, but that doesn’t mean it can’t move the market.
“Policy bets aside, the release may have market-moving potential from a sentiment perspective,” said Ilya Spivak, a currency strategist at DailyFX.
Another item worth watching when the report crosses: wage growth.
Hourly compensation for the nonfarm business sector grew 3.4% in the third quarter from a year earlier, the second-biggest increase since the third quarter of 2009. And last month’s jobs report showed a 2.5% pickup in average hourly earnings compared with October 2014. Ms. Yellen said Wednesday it was too soon to say if recent evidence of firming wages foretell a long-awaited sustained pickup. Friday’s report will offer more clues.
Leading into Friday’s jobs report, several Fed officials this week, including Ms. Yellen, have signaled that the central bank is ready to move on rates in two weeks, barring any major surprise between now and then.
Thursday, in front of the Joint Economic Committee in Washington, Ms. Yellen indicated she’s ready to up rates before year-end because the domestic economy is improving. The day before that, on Wednesday, she gave a speech to the Economic Club of Washington, providing a similar message.
After her testimony Thursday, Sam Bullard, senior economist at Wells Fargo Securities, said he’s “hopeful with Yellen’s fairly optimistic comments on the outlook that maybe she believes (or already knows) the employment report is, on balance, solid and supportive to the December rate move.”
The monthly jobs reports also offer insight into hiring in a variety of job sectors, so this report will offer clues on how different industries are responding to lower oil prices, weak demand overseas and a stronger dollar.
Cheap oil continues to weigh heavily on the mining industry, which lost 5,000 jobs in October and has shed 109,000 jobs since peaking in December 2014. Meanwhile, low oil prices have benefited other sectors, including manufacturing and construction.
Bond yields are little changed before the jobs report. The 2-year yield is near a 5-year high while the 10-year yield is near the highest in more than three weeks. Economists expect 200k growth and 5% unemployment rate. Barring a huge negative surprise from the data, a rate hike in two weeks is baked in the cake. But with soft ISM manufacturing and services data earlier this week, expectations are growing that the Fed would be slow in doing more tightening in 2016, a case that would prevent a sharp rise in bond yields. The 10-year US yield was 2.319% vs 2.328% Wednesday. The two-year yield was 0.955%.
November Jobs Report: Everything You Need to Know
The Bureau of Labor Statistics said nonfarm payrolls increased by a seasonally adjusted 211,000 job in November. The unemployment rate was unchanged at 5%, reflecting an expansion in the labor force as more Americans came off the sidelines and began searching for jobs. Economists had been expecting 200,000 jobs and 5%. The consensus seems to be that the report gave the Fed plenty of reason to raise rates later this month.
Here at MoneyBeat HQ, we crunched the numbers, tracked the markets and compiled the commentary before and after the data crossed the wires. Feel free to continue the conversation in the comments section. And while you’re here, why don’t you sign up to follow us on Twitter.
Here’s how it all went down:
Before Thursday morning, today’s jobs report was seen as an afterthought. Sure, every month there’s this hype about “the most important jobs report ever,” or some such, but this month it didn’t have that weight at all. The Fed was set to raise rates, everything was lined up. The jobs report would have to be a total disaster to change that.
Then the ECB happened.
The market seems to have gotten its feet back under it after yesterday’s Draghi surprise. Dow futures are up about 30 points, and S&P futures are up about 4. The yield on the U.S. 10-year Treasury note’s come in a hair, at 2.31%. The euro’s down about 0.5% to the dollar, and oil is up 1.3%.
Still, a lot of damage was done yesterday, both on the charts, and in people’s perceptions. If the ECB can’t deliver, can the Fed really start raising rates? It can if the economy justifies it, and that’s where this report comes in. Suddenly, this report matters again.
Analysts estimate payrolls expanded by 200,000 in November. Fed Chairwoman Janet Yellen told lawmakers Thursday that payroll gains of fewer than 100,000 are needed to absorb new entrants into the labor force and that fewer than 200,000 new jobs a month are needed to bring the jobless rate down further and draw discouraged workers back into the labor market. November payroll gains of even 50,000 would still leave the three-month average at more than 150,000 and it would leave the 12-month average above 200,000. In other words, it would take a very big miss on job growth to change the Fed’s view on job growth, and, again, a very big miss might be seen as anomalous.
In short, if the numbers are anywhere near consensus Friday, the headline from the jobs report is likely to be that the Fed is on track to raise short-term interest rates on December 16.
In our Morning MoneyBeat column today, Mark Hamrick of Bankrate said we’d need to see something substantially below 80,000 for the Fed to hold off. “And even then, I’m not sure we’d avoid a December rate hike.”
“The books aren’t going to be rewritten on any of [the numbers],” said Mr. Hamrick, senior economic analyst at Bankrate. “It’s the trend. The single set of numbers we’ll be getting for November cannot radically change the trend.”
The odds of this report coming in so bad that it actually changes the economic picture are low, but that doesn’t mean it can’t move the market.
“Policy bets aside, the release may have market-moving potential from a sentiment perspective,” said Ilya Spivak, a currency strategist at DailyFX.
“Looking at the outcome through this prism, a soft result that keeps Fed rate hike bets intact may spur fears that U.S. growth is an insufficient counterweight to weakness in the Eurozone and China, undermining risk appetite. That may punish higher-yielding FX like the Australian and New Zealand dollars while boosting the safety-linked Japanese yen. A strong result might establish a narrative of U.S. resilience even as tightening looms ahead, producing the opposite dynamic.”
Hourly compensation for the nonfarm business sector grew 3.4% in the third quarter from a year earlier, the second-biggest increase since the third quarter of 2009. And last month’s jobs report showed a 2.5% pickup in average hourly earnings compared with October 2014. Ms. Yellen said Wednesday it was too soon to say if recent evidence of firming wages foretell a long-awaited sustained pickup. Friday’s report will offer more clues.
Leading into Friday’s jobs report, several Fed officials this week, including Ms. Yellen, have signaled that the central bank is ready to move on rates in two weeks, barring any major surprise between now and then.
Thursday, in front of the Joint Economic Committee in Washington, Ms. Yellen indicated she’s ready to up rates before year-end because the domestic economy is improving. The day before that, on Wednesday, she gave a speech to the Economic Club of Washington, providing a similar message.
After her testimony Thursday, Sam Bullard, senior economist at Wells Fargo Securities, said he’s “hopeful with Yellen’s fairly optimistic comments on the outlook that maybe she believes (or already knows) the employment report is, on balance, solid and supportive to the December rate move.”
The monthly jobs reports also offer insight into hiring in a variety of job sectors, so this report will offer clues on how different industries are responding to lower oil prices, weak demand overseas and a stronger dollar.
Cheap oil continues to weigh heavily on the mining industry, which lost 5,000 jobs in October and has shed 109,000 jobs since peaking in December 2014. Meanwhile, low oil prices have benefited other sectors, including manufacturing and construction.
Bond yields are little changed before the jobs report. The 2-year yield is near a 5-year high while the 10-year yield is near the highest in more than three weeks. Economists expect 200k growth and 5% unemployment rate. Barring a huge negative surprise from the data, a rate hike in two weeks is baked in the cake. But with soft ISM manufacturing and services data earlier this week, expectations are growing that the Fed would be slow in doing more tightening in 2016, a case that would prevent a sharp rise in bond yields. The 10-year US yield was 2.319% vs 2.328% Wednesday. The two-year yield was 0.955%.
November Jobs Report: Everything You Need to Know
posted by Zo Heri at 6:34 PM
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