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.