November Payrolls Rise A Disappointing 155K As Wage Growth Misses

With whispers that the November jobs report would disappoint to various factors such as winter storms and rising jobless claims, moments ago the BLS reported that November payrolls indeed disappointed expectations, printing at 155K, below the 198K expectations, with the October number revised lower from 250K to 237K.

The change in total nonfarm payroll employment for October was revised down from +250,000 to +237,000, and the change for September was revised up from +118,000 to +119,000. With these revisions, employment gains in September and October combined were 12,000 less than previously reported.

However, confirming that this number too was weather affected, the BLS reported that "workers unable to work due to bad weather" came at a substantial 129K, well above prior November months (2017 was 84K, 2016 was 19K, 2015 was 97K).

As Southbay Research notes, one can blame the weather for today's miss:

Supply Chain (ex retail) Strong

  • Manufacturing: +27K (3rd highest for the year)
  • Transportation: +25K (a 3 year high)
  • Wholesale: +10K (3rd highest for the year)

Weather-Sensitive Sectors Hit

  • Retail: +18K (vs 27K November 2017)
  • Leisure & Hospitality: +15K (vs. 20K November 2017)
  • Construction: +5K (vs. 42K November 2017)
  • Mining: -3K (vs. +6K November 2017)

Meanwhile,the Household survey saw a 233K increase in employment, a sharp drop from the 600k increase in October.

The unemployment rate remained unchanged, as expected at 3.7%, already the lowest since 1968.

Meanwhile, while the U-6 gauge of underemployment has been falling for years, it's showing some signs of stabilizing and in November, it actually ticked up modestly, from 7.4% to 7.6%.

The overall labor force participation rate continued to hover near a four-year high of 62.9, if still well below its historical average.

And while hourly earnings rose at a hottish 3.1% year over year, and as consensus expected, on a monthly basis, the increase was 0.2%, below the 0.3% expected, with October also revised down from 0.2% to 0.1% M/M, and adding fuel to any dovish reversal by the Fed.

Another notably negative aspect to the report: the average workweek declined from 34.5 hours to 34.4, below the 34.5 expected, which provided an artificial boost to "average" hourly earnings.

On the flipside, and a fact which will likely be used by Trump, black unemployment dropped to a new record low.

Looking at specific job sectors:

  • Manufacturing payrolls rose 27k after rising 26k in the prior month (economists estimated 18k)
  • Oil and gas extraction payrolls rose 7,400 from a year earlier.
  • Gasoline stations payrolls rose 2,400 in Nov. after falling 2,200 in Oct.
  • Pipeline transport payrolls fell 500 in Nov. after rising 100 in Oct.
  • Petroleum and coal payrolls fell 1,500 in Nov. after falling 600 in Oct.

So while both the headline jobs print and wages came in weaker than expected, a big reason for this was weather. The question, however, is whether the market will focus on the one-time factors impacting the November print, or whether it will instead see this as "bad data" which will then be interpreted as good news for stocks, as it means a Fed pause is even more likely.

In a tangential preview of the jobs report, Chair Powell last night made it clear that he does not view today's report as especially bad; that or he was trying to put a spin on the number today. As a reminder, the Fed receives the employment numbers before the official release, however - naturally - is unable to comment directly on the report until it is out. However in the context of Powell's remarks last night emphasizing the strength of the labor market may have been an attempt to calm anxieties ahead of a surprisingly weak report.

For his part, Renaissance macro economist Neil Dutta thinks that the report was just shy of Goldilocks:

"November’s employment report was short of consensus estimates, but not weak enough to keep the Fed from hiking this month. Factory hours worked rose, which implies continued growth in manufacturing production."

Commenting on the report, Bloomberg economist Yelena Shulyatyeva writes that "The details of the report shed light on what to expect in 2019 -- while manufacturing jobs held strong overall, construction, and auto production hiring slowed down significantly, suggesting higher interest rates are taking a toll. Mining did not take long to cut workers in response to the recent plunge in oil prices.''

Summarizing the report, Bloomberg Fed reporter Steve Matthews said:

  • In sum, it shouldn’t change the outlook for a December hike at all, which still seems probable though not certain.
  • The Fed view on any report is that it’s just one report, and that a single report doesn’t matter much and is subject to revision.
  • The payroll number is still far in excess of what is needed to keep the unemployment rate level.
  • Unemployment is the single most important figure and it remains near a 50-year low.
  • Wages basically are in line with moderate growth amid weak productivity.
  • Jim Bullard of the St. Louis Fed will speak today and probably comment. While’s he’s a dove, I expect his view of the report to mirror that of the rest of the FOMC.