The jobs report removes all remaining questions about the Fed’s next move, helping move market discourse from the timing of a lift-off to the pace of future interest rate increases.
This morning’s November jobs report from the Bureau of Labor Statistics reconfirms the positive momentum started by the last month’s reading. Not only did the ‘headline’ jobs number come ahead of estimates (211K vs. estimates of 200K), but the report’s internals in terms of wages, the unemployment rate, and revisions are also painting a favorable-looking picture.
The unemployment rate remained unchanged at 5%, but appears headed towards carrying a 4-handle next month. Importantly, the revisions for the last two months’ numbers were positive, with October’s already blockbuster tally going up to 298K from 271K. Including this morning’s revisions, the average monthly tally for the last three months now stands at 218K.
The report’s Fed implications are clear – we will get lift-off this month. At the same time, the labor market has enough slack to give the Fed the flexibility to be slow and deliberate in pacing future rate increases. Where is the slack if the unemployment rate is about have a 4-handle as mentioned earlier? The labor forces participation rate remains at a multi-year low of 62.5% (up a tick from October), the average workweek actually edged down a bit in November, and average hourly earnings have started going up lately but remain far away from producing wage inflation.
All in all, a good report for the economy and the market.
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