November non-farm payrolls showed a +227K gain in employment, exceeding street expectations of +218K. September and October job gains were revised upwards by a total of +56K more than previous estimates. Bringing total job gains to a total of +283K.
The 3-month average of job gains moved up from 123K to 190K, while the 12-month average also moved up from 186K to 190K. Weather and strike-related factors played a role in the results over the last 2 months. “Employment increased by 32,000 in transportation equipment manufacturing in November, reflecting the return of workers who were on strike.”
Job gains were relatively broad-based among all industries, with the leisure & hospitality sector trending higher. Although retail trade was the one sector that lost jobs (-28K).
Total NFP employment is now +4.6% above the pre-COVID highs.
Job growth is 1.4% over the past 12 months, consistent with a stable job market.
The
unemployment rate
ticked up from 4.1% to 4.2% in November, as the number of unemployed people (7.1 million) increased from the 6.3 million unemployed at this time last year.
Average hourly earnings increased +0.4% in November, exceeding street expectations of +0.3%. Wages have increased +4.0% over the last 12 months, about the same as last month's annualized wage gains. On balance, wages are growing above the rate of inflation. Which is good news.
Average hourly work week ticked up a bit, from 34.2 hours to 34.3.
We got our first look at consumer sentiment for December, which came in at 74 (a seven-month high), above street expectations of 73.3. Consumer sentiment has remained below the historical average (orange line) since June 2021 (31 straight months), but well off the all-time lows of 50 in June 2022. This is the 5th consecutive month of rising sentiment and a seven-month high.
Inflation expectations over the next 12 months moved up from 2.6% to 2.9%, the highest in 7 months but still in line with the historical average. While long run inflation expectations ticked down to 3.1%. This remains an important indicator to follow, as the inflation fight is likely going the full 12 rounds.
The NFP payroll report has become very volatile of late, with prior month revisions of six figures becoming a normal occurrence. Today’s report was welcome, as it confirms the labor market isn’t falling off a cliff while the Fed attempts to bring inflation back down to normal. The problem is that core inflation is still well above the Fed’s mandate, as core CPI is 3.3%, and core PCE is 2.8%. The Fed was late in raising rates (insisting inflation was “transitory”, yeah right!) and now might be running the risk of easing too early.
Bottom line; its way too early to call a winner in this fight. CPI will be released next week, and the Fed is widely expected to cut rates another 25 basis points. Those who were predicting a “hard landing” (Fed induced recession), haven’t been proven wrong yet. And those who predicted a “no landing” (inflation taming without a recession) shouldn’t be so quick to take their victory lap either.