Nonfarm Payrolls Increased 321,000 in November
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Implications:  Dynamite report on the direction of the labor market.  Not only were the headlines very good, but the details were strong as well, including higher wages, shorter job searches for unemployed workers, and more workers quitting their jobs confident they'll be able to find a better one.  Nonfarm payrolls grew 321,000 in November, easily beating the consensus expected 230,000 and higher than any forecast from any economics group.  Payrolls grew in every major sector and exceeded 200,000 for the 10th straight month.  Although civilian employment, an alternative measure of jobs that includes small-business start-ups, rose only 4,000, the number missing work due to bad weather was 153,000 compared to an average of 81,000 in the past twenty Novembers, so we expect a better number next month.  Also, civilian employment is very volatile from month to month and was up 683,000 in October.  The unemployment rate remained at 5.8% as the labor force expanded 119,000 and the labor force participation rate remained at 62.8%.  The participation rate is the same as the average for the past eight months, suggesting it's (finally) leveling off.  The details, however, are what make this report so strong.  First, the median number of weeks of unemployment fell to 12.8, the lowest so far in the recovery. Second, the share of quitters among the unemployed increased to 9.1%. This indicator is important as Fed Chair Yellen has used it in the past as a sign of worker confidence.  Third, and perhaps most important, was a 0.4% increase in average hourly wages, the largest gain in 17 months.  Some analysts have been saying the Fed needs to see faster wage growth before it starts raising short-term rates. Well, there they go.  Combined with a 0.6% increase in total hours, total cash earnings were up 1% in November, the most for any month since 2006, and are up 4.8% versus a year ago.  These gains are much faster than the roughly 1.5% increase in consumer prices and show growing consumer purchasing power.  Despite modest inflation, the growing strength in the labor market supports our forecast that the Fed will start raising short-term rates in the first half of next year. At the December meeting in two weeks, look for the Fed to remove the "considerable time" language in its statement (regarding how long it will keep short-term rates near zero).  Although the labor market is far from fully healed, those pre-disposed to gripe about it are finding it harder and harder to find data to complain about.  Better policies would certainly have resulted in faster job growth the past several years.  But nonfarm payrolls are up 228,000 per month in the past year and we expect more job growth, less unemployment, and faster wage growth in the year ahead.



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Posted on Friday, December 5, 2014 @ 11:35 AM

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