November payrolls grew by just 210k, well less than the estimate of 550k and only partly offset by an upward revision of 82k to the two prior months. Of this, the private sector added 235k vs the forecast of 536k and vs 628k last month. The household survey in stark contrast though saw a large 1.136mm job gain and combined with the increase in the labor force of 594k, the unemployment rate fell 4 tenths m/o/m to just 4.2% vs 4.4% in March 2020 and 3.5% in the two months before that. The U6 rate declined by 5 tenths to 7.8% vs 8.8% in March 2020 and 7% in February 2020.
The participation rate ticked up by two tenths to 61.8% and that is the highest since March 2020 when it was at 62.6% and vs 63.3% in February 2020. The employment to population ratio jumped by 4 tenths to 59.2%, getting close to the March 2020 level of 59.9% and February 2020 at 61.1%. The workweek also rose one tenth unexpectedly to 34.8 and likely why average hourly earnings missed the estimate by one tenth, although it was still up .3% m/o/m and 4.8% y/o/y. Combining the two saw average weekly earnings higher by .5% m/o/m and 4.8% y/o/y. Wages for leisure/hospitality workers continue to rise sharply, up .8% m/o/m and 15% y/o/y.
Further evidence of people leaving for ‘greener’ pastures, the percentage of job leavers rose to 12.5% from 11.5% and that is the most since February 2020 when it was at 13.3%.
With respect to the jobs breakdown, the service sector added 175k, the slowest since January as leisure/hospitality contributed just 23k vs 170k in the month prior. Retail lost 20k jobs and trade/transport hiring slowed to 37k from 111k. The goods side added 60k jobs, about half in manufacturing and half in construction and this compares with 94k in October and 65k in September. The supply of labor obviously is still a major challenge
Bottom line, while the headline number disappointed relative to expectations, the big household survey figure, the rise in the workweek, the increase in the participation rate and employment to population ratio, along with the near 5% average weekly earnings print, all point to a Fed that will quicken the pace of taper as many have said and we’ll see how that goes before debating rate hikes.
As the internals were better than the headline establishment survey print, the short end yields are little changed in response. The 10 yr yield is down 1 bp and inflation breakevens are unchanged.
U3 Unemployment Rate
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor.