NonFarm Payrolls

The US reported an increase of 155,000 jobs in November, significantly below expectations. Negative net revisions worth 12K were not helpful. Another downer was the slower wage growth in November: 0.2%. However, salaries are still up 3.1% YoY, within expectations and at absolute levels, an upbeat figure. Moreover, the Unemployment rate remained at the historical low of 3.7% with a stable participation rate of 62.9%.

For seemingly the first time in months, today's US jobs report had at least a little potential to influence the imminent Federal Reserve interest rate decision. Amidst a dramatically flattening yield curve, fears that the US-China trade truce could fall apart following the arrest of a prominent Chinese businesswoman, and a sharp drop in the stock market, Fed Fund futures traders were pricing in "just" a 72% chance of an interest rate hike in two weeks' time, according to the CME's FedWatch tool.

The 155k US November payroll gain after 12k in downward revisions was a disappointment, as was a down-tick in the workweek to 34.4 that left a 0.2% hours-worked drop, and weak figures for the construction sector. Yet the mix is typical of BLS survey week disruptions, as seen in September, and this month the week lined up with the California fires and cold stormy weather elsewhere.

US wages rose 0.4% MoM in August, double the early expectations. The broader YoY measure shows an acceleration from 2.7% to 2.9%, also above initial projections. Higher salaries imply further consumption and the "right" kind of inflation, one that comes from increasing demand and nor from external factors such as rising oil prices or price hikes stemming from tariffs. Wages are correlated to core inflation.

The buoyant and largely better than expected nonfarm payrolls gave a modest boost to the dollar with the greenback gaining about 50 points against the euro and 20 versus the yen in the first half hour after the release. Payrolls at 201,000 beat the consensus estimate by 10,000 but the equal downward revision to the July number left the two-month total flat. The headline U-3 unemployment rate, which only counts as unemployed those who have looked for work in the prior month was stable at 3.9%. The more realistic U-6 rate, charting those who have sought work in the past year, improved slightly to 7.4% from 7.5% in July.

In a world where financial media sensationalizes every US jobs report as “The Most Important Jobs Report Ever,” even the most bombastic personalities had to admit today’s release was relatively insignificant, at least as far as NonFarm Payroll reports go. After all, the US economy had shown job growth for 94 consecutive months heading into today, and the Federal Reserve has seemingly already decided to raise interest rates at its meeting later this month.