This morning’s very strong jobs report could be an indication that the U.S. economy was finally graduating to an above-trend growth momentum. That will be good news for stock market investors. But it will likely stoke Fed fears all over again.
A total of +321K jobs were created in the U.S. economy, way above consensus estimates of around +230K and the 12-month average of about 224K. Revisions to the prior two months were revised higher, with October now at +243K from +214K and September now at +271K from +256K. The unemployment rate remained unchanged at 5.8% while average hourly earnings increased a bigger than expected +0.4%.
Private sector jobs totaled +314K in November vs. +236K in October and 249K in September. The gains were concentrated in professional and business services, retail, healthcare and manufacturing. Professional and business services added 86K in November, above the preceding 12-month’s average of 57K.
Accounting was the biggest gainer in this category, while temp jobs also gained. Retail added 50K in November, more than double the 12-month average gain of 22K, likely reflecting a hiring binge ahead of the holiday season. Manufacturing added 28K jobs while construction contributed 20K jobs.
This is a very impressive report in every respect. Not only are the headline gains very strong, but the report’s internals are showing plenty of momentum as well. Wage gains were very weak throughout this recovery, belying hopes that the fall in the unemployment rate will start showing up in higher wages. This report gives us the first real sign that wage gains are on the way, with average hourly earnings up +0.4% from the month before and +21.% from the same period last year. Average workweek also increased, up 0.1 hours to 34.6 hours.
It is perhaps prudent not to read too much into one month’s report. This report could be the a sign of things to come or it could just be an outlier. If it is a sign of things to come, then it would mean that the U.S. economy has actually graduated to an above-trend growth pace. The implication of that view is that the Fed will need to be a lot more vigilant than it needed to be in the past.
Markets don’t like Fed uncertainty, but that’s exactly what they will get if the boom times are back. Monthly job gains in the 300K vicinity are representative of boom times. We will know in early January with the December jobs read whether this report was for real or just a one-off.
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