November Payrolls Jump 228K, Beat Expectations But Wage Growth Disappoints

In a continuation of the recent theme shown by the labor market, the BLS reported that November payrolls rose by a seasonally adjusted 228K, beating expectations of 200K, if lower than October's downward revised 244K (from 261K) while September was revised up from +18,000  to +38,000. With these revisions, employment gains in September and October combined were 3,000 more than  previously reported.

There were few surprises in the report, which saw the labor force participation rate flat at 62.7%, near a 30+ year low, while the unemployment rate also remained unchanged at 4.1%, the lowest since Dec 2000.

And while overall the labor report was strong, there was once again disappointment in wage growth, with average hourly earnings rising 0.2% m/m, below the consensus estimate of est. 0.3%, with the October number revised lower to -0.1%. The Year over year number also missed, printing at 2.5%, up from October's 2.3% but below the consensus print of 2.7%.

Some further details:

  • Nonfarm private payrolls rose 221k vs prior 247k; est. 195k, range 155k-250k from 31 economists surveyed
  • Manufacturing payrolls rose 31k after rising 23k in the prior month; economists estimated 15k, range 10k to 35k from 19 economists surveyed
  • Underemployment rate 8% vs prior 7.9%
  • Change in household employment 57k vs prior -484k

Wall Street's reactions focused on the upside in the headline print, while noting the miss in hourly earnings.

SEAN LYNCH, CO-HEAD OF GLOBAL EQUITY STRATEGY, WELLS FARGO INVESTMENT INSTITUTE, OMAHA, NEBRASKA:

”Definitely a little bit of a surprise to the upside. The markets are holding on to the early gains that futures were pointing, that maybe says we are closer to a 200,000 jobs number than 150,000, you know we’ve had messy jobs numbers the past couple of months so this confirms a pretty good labor market.

 

”It should be taken a pretty good sign there wasn’t a snapback because of the hurricanes or anything like that, revisions were up just modestly, too.

 

”(Wages) were kind of right in line with expectations – 0.2 percent versus 0.3 percent, year over year we are at 2.5 percent so pretty good wage gains but nothing that starts to worry people  about inflation. That is the key thing we watch next year as equity investors.

 

“Unless there was just a total outlier in the number, we have the (Fed) raise coming this month and then we are in line with what the futures market is telling us and that is two for next year. The interesting thing following this data is do they start pricing in another hike because it’s a pretty strong number and as Powell gets his footing do we see the odds of another increase materialize. I’d watch financial today, it will be interesting to see how they do. They have had a strong couple of weeks, we get a strong jobs number here, do you see financials continue to gain strength in this market if it looks like the Fed may be more apt to raise rates here.”

PHIL ORLANDO, CHIEF EQUITY STRATEGIST AT FEDERATED INVESTORS IN NEW YORK:

”The market’s going to react fine, this was a perfect number. This was a fairway number; we’re right down the middle of the fairway. When you look at the negative revision last month, that balances out the significant beat this morning. The manufacturing number was excellent, we picked up a tick in the hours worked, that’s huge. Wage growth is moving solidly higher, but not excessively so.

 

”I don’t see anything wrong with this number. I don’t see any reason the market would turn on this number.”

* * *

And some additional details from the report:

Total nonfarm payroll employment increased by 228,000 in November. Employment continued to  trend up in professional and business services, manufacturing, and health care. Employment  growth has averaged 174,000 per month thus far this year, compared with an average monthly  gain of 187,000 in 2016.

Employment in professional and business services continued on an upward trend in November  (+46,000). Over the past 12 months, the industry has added 548,000 jobs.

In November, manufacturing added 31,000 jobs. Within the industry, employment rose in  machinery (+8,000), fabricated metal products (+7,000), computer and electronic products  (+4,000), and plastics and rubber products (+4,000). Since a recent low in November 2016,  manufacturing employment has increased by 189,000.

Health care added 30,000 jobs in November. Most of the gain occurred in ambulatory health  care services (+25,000), which includes offices of physicians and outpatient care centers.  Monthly employment growth in health care has averaged 24,000 thus far in 2017, compared  with an average increase of 32,000 per month in 2016.

Within construction, employment among specialty trade contractors increased by 23,000 in  November and by 132,000 over the year. 

Employment in other major industries, including mining, wholesale trade, retail trade,  transportation and warehousing, information, financial activities, leisure and hospitality, and government, changed little over the month.

The average workweek for all employees on private nonfarm payrolls increased by 0.1 hour to 34.5 hours in November. In manufacturing, the workweek was unchanged at 40.9 hours, and overtime remained at 3.5 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.7 hours.

In November, average hourly earnings for all employees on private nonfarm payrolls rose by 5 cents to $26.55. Over the year, average hourly earnings have risen by 64 cents, or 2.5 percent. Average hourly earnings of private-sector production and nonsupervisory  employees rose by 5 cents to $22.24 in November.

Comments

D.T.Barnum Fri, 12/08/2017 - 08:46 Permalink

prices goin up; jobs, goin down.  ain't no funky jobs to be found.  you gotta get over, before you go under.  now i drink from a paper cup, it's gettin bad

Harry Lightning SoilMyselfRotten Fri, 12/08/2017 - 09:09 Permalink

The ambulatory health care services subsector consists of these industry groups:

  • Offices of Physicians
  • Offices of Dentists
  • Offices of Other Health Practitioners
  • Outpatient Care Centers
  • Medical and Diagnostic Laboratories
  • Home Health Care Services
  • Other Ambulatory Health Care Services

The increase in workers in this part of the economy is due far more to the onset of flu season in an aging population than it has to do with opioid users. Additionally, obamacare continues to force medical practitioners to hire clerical help to input patient data into the health records databases.

In reply to by SoilMyselfRotten

pods SoilMyselfRotten Fri, 12/08/2017 - 09:50 Permalink

Health care spending goes up when you have a chronically depressed population. That sort of thing happens in a depression.When things are great you shake off the normal aches of life. Here, in the USA in 2017, those aches are felt a LOT more.And of course drug intake will rise. Who the fuck wants to walk around all day knowing just how fucked we are?pods

In reply to by SoilMyselfRotten

eclectic syncretist D.T.Barnum Fri, 12/08/2017 - 09:03 Permalink

These charts don't mean shit compared to the one most important chart, that you've never seen here or anywhere else. Want to know what it is? You take the difference between the interest rate the Fed charges to counterfiat credit for member banks (found here: https://fred.stlouisfed.org/series/INTDSRUSM193N), and the interest rate those banks charge YOU to access their imaginary credit (seen here: https://fred.stlouisfed.org/series/TERMCBCCALLNS). The difference is consistently a little more than 10%. Now graph that as compounded interest over the last 20 years or so, and realize that while the Fed has ensured your savings accrued almost nothing in interest, they gave the banksters a 10-bagger out of a rigged system where they don't even have to put any skin in the game. 

In reply to by D.T.Barnum

Harry Lightning Hal n back Fri, 12/08/2017 - 09:02 Permalink

Whoever they are, they deserve to get their asses beat. Really stupid. I don't think the US will be able to pay off the amount of debt it has outstanding now nor will they be able to roll it over when it matures. The credit risk premium alone for US Treasuries in the long end should be over 5%. But there are pension funds that have to invest regardless of the interest rate, because unless someone figures out how to extend life expectancy by a few decades, these funds are going to be paying out some death benefits in the next 30 years. So they and their cousins in the life insurance business need that cash flow for the long term. 

In reply to by Hal n back

yogibear Fri, 12/08/2017 - 08:46 Permalink

LOL, algos are happy, so they bid the market up. Who cares about wages anymore. As long as debt, stocks and housing cost go infinite.Central bank rigged.

FreeShitter Fri, 12/08/2017 - 08:49 Permalink

Big picture here........no/low wage growth because its all getting transfered up to the .01% constantly, more jobs ---> can collect more taxes ---> elite get richer and richer.  Financialization of a country, no more owning outright for the youfs, your future is to work, finance everything and pay your taxes to the beast. Aint the NWO a motherfucker?

Harry Lightning FreeShitter Fri, 12/08/2017 - 08:52 Permalink

The wealthy are not getting wealthy off of wages, but from the stock market. 2.5% real wage growth, which is close to 5% nominal, is a welcome change for the US economy. The real wage rate needs to move up to 5% annually before workers will experience any change in their standard of living. The Federal Reserve should be prevented by Cingress from raising short term rates any further until that 5% real wage increase rate is achieved.

In reply to by FreeShitter

Harry Lightning totenkopf88 Fri, 12/08/2017 - 09:23 Permalink

Perhaps that is true, but the dictatorships don't seem to be doing all that much better.The problem with democracy is not the method, its the practitioners. If the people of a country do not take an active role in governing the representatives they choose to govern, then the whole enterprise de-evolves quite quickly into an oligarchy.

In reply to by totenkopf88

bshirley1968 Harry Lightning Fri, 12/08/2017 - 11:14 Permalink

The problem with democracy is the method.  What part of "mob rule" don't you understand? "Men" cannot be trusted to make decisions IN ANY FOR OF GOVERNMENT without strict oversight by a set of laws, and severe punishment for breaking those laws.It took about 3 years for the government in Philadelphia to break the Constitution and there was little to no consequences for that violation.  Jefferson righted the wrong and we moved forward with governmental overreach until it reached a climax in 1860.  The South tried to peacefully walk away, but the North invaded.......also known as "The Northern Aggression".  The North won.......i.e. the Federal Government. ......also nd now there was no one left to apply punishment for breaking the laws of the Constitution.   And here we are today.It can be summed up thus way, "From time to time the Tree of Liberty must be watered by the blood of tyrants and patriots."  No "water" and the tree dies.  The "tree" hasn't been watered in this country in 152 years.  It's looking pretty anemic.Your logic is no different than those that blame guns for crime.  The guns and the Constitution are not the problems.  Don't throw the baby out with the bath water. 

In reply to by Harry Lightning

Harry Lightning Fri, 12/08/2017 - 08:49 Permalink

The good news is that wages are rising faster than consumer prices, which is what the US economy needs for long into the future if it is to generate the tax revenue to make a dent in the debt it carries. The bad news is that long term yields are way too low. Nominal wages are rising faster now than mortgage rate interest, and that is a recipe for inflation. With an economy this far into expansion, the relationship should be slightly reversed. Long termm Treasury yields should be closer to 3.5% than 2.5%.

amadeus39 JMT Fri, 12/08/2017 - 12:00 Permalink

Holding down several minimum wage jobs leaves no time to cook and easy credit always helps to ease the pain. Also fast food places can provide a good meal cheaper than a person can cook one at home. Have you tried the KFC $5 value meal? Breast, side dish drink and cookie. Can't duplicate at home.  

In reply to by JMT

JMT Harry Lightning Fri, 12/08/2017 - 09:04 Permalink

Rent's have been rising by at least 5% each year since 2010. $2500 for a one bedroom apartment with no real amenities or utilities included is the new normal in most of the country.in NYC, Boston,San Francisco and Los Angeles rent's Begin in the$3000s per month. Of course, millennials have mommy and daddy who are usually taking Care of rent for Caitlin or Tyler along with student loan payment

In reply to by Harry Lightning

Harry Lightning JMT Fri, 12/08/2017 - 09:12 Permalink

That's exactly my point. Because long term rates are as low as they have been, housing prices have risen so fast that new landlords need to raise rental prices at sharply higher rates than we have seen in quite some time. Unduly low long tern interest rates cause inflationary pressures, which is why the Fed should be raising long term interest rates by selling some of their long term investory, rather than raising short term interest rates by restricting liquidity.

In reply to by JMT

JMT Harry Lightning Fri, 12/08/2017 - 10:06 Permalink

No it's because of red hot demand in metro areas like NYC, Boston and anywhere in southern California. Millennials would rather pay$2000-$6000 a month in rent to live in a trendy neighborhood. About 50% of millennials are homo which explains why child births are at a record low plus most women in their 20s and 30s are prude and frigit

In reply to by Harry Lightning

Yen Cross Fri, 12/08/2017 - 08:51 Permalink

  That was a big revision down in the NFP numbers.  From 261 to 244. Just like with earnings, the bar is always some bullshit "goalseeked" number until you read the final small  print.

Harry Lightning Yen Cross Fri, 12/08/2017 - 08:58 Permalink

The downward revision to the October payrolls was offset by a likewise increase in the September payrolls. On a month to month basis the numbers are distorted by seasonal factors, but if you watch the year-over-year numbers, the alignment of the two surveys that constitute the employment report is quite astonishing. Now perhaps all the numbers are wrong, but at least they all line up to be wrong together by the same amount.

In reply to by Yen Cross