NFP Quick Analysis: Weak report? Not when looking under the hood, and not for stocks

Less than half of expectations – that is the headline from November's Nonfarm Payrolls, which showed an increase of only 210K jobs vs. 550K expected. Wage growth also fell short of expectations with only 4.8% YoY instead of 5% projected. 

A halt in salaries is undoubtedly deflationary. Less money in Americans' pockets means less price pressure, especially in core inflation – what matters to the Federal Reserve. The figures come shortly after Fed Chair Jerome Powell said it is time to retire the term "transitory" when referring to inflation.

Will he change his mind? Barely. The 0.2% miss in annual wage growth could result in a slower acceleration of tapering – currently at $15 billion – but not a cancellation of the policy. That explains the drop in the dollar, albeit a mild one. The greenback could find other reasons to rise, such as Omicron fears, or other developments. 

However, the Unemployment Rate dropped from 4.6% to 4.2%, a substantial drop, while the PArticipation Rate advanced from 61.6% to 61.8%, Finally, more Americans are returning to the workforce. While that goes hand in hand with weaker wages – more employees mean more competition for jobs and lower salaries – it initially seems confusing that jobs grew by only 210K.

The reason for the confusion is the Bureau of Labor Statistics' separate surveys for constructing the NFP. Beyond the details of these surveys, the important thing to note is that the US economy continues growing at a fast pace, drawing people back in. That implies more sales for corporations, albeit with lower inflation. In one word – Goldilocks.

Stocks are set to weather Fed tightening and rally into Christmas. Somewhat weaker Fed action with more people able to buy is good news for investors.