KEY DATA: Payrolls: +211,000; Revisions: +35,000; Unemployment Rate: 5.0% (Unchanged); Hourly Wages: +0.2%
IN A NUTSHELL: “There ain’t no stopping (them) now.”
WHAT IT MEANS: My apologies to Luther Vandross, but there really is nothing except a major crisis that will stop the Fed from its appointed first round of rate hikes. All it would have taken is a mediocre employment report to provide the necessary cover to raise rates and the November data were more than that. Job gains were solid and there were also upward revisions to both September and October. The three month average now stands at 218,000, which is quite good given that the biggest complaint businesses have is the lack of supply of qualified workers. And the increase came despite further cut backs in energy-related firms, weakness in clothing stores, a weird crash in the motion picture industry and a very strange reduction in the vehicle sector, which continues to set new sales records. And, we actually saw a decline in temporary help services companies! In other words, this report was probably even stronger than the headline number implies. Hourly wages rose but there was a small reduction in hours worked, which also seemed a bit strange.
On the unemployment side of the report, almost every component was solid. While the rate remained at 5%, there were strong increases in the labor force and the number of people employed. This led to a rise in the participation rate. While I don’t think much of it, the infamous U-6 rate, which includes all reasons for not having a job, did raise a tick. However, it is still down 1.5 percentage points over the year. The stronger labor market is curing lots of ills.
In a different report, the trade deficit widened in October, but the three-month average is still declining. In any event, today is all about the employment numbers.
MARKETS AND FED POLICY IMPLICATIONS: This report all but green lights the Fed. And it should. There really is nothing more to say other than reprint the Luther Vandross lyrics from the song, “Ain’t No Stoppin’ Us Now”,
Now, are y’all ready?
Are y’all ready?
Here we go now
Do it with the fever
Yeah, come on
Ain’t no stoppin’ us now
We’re on the move
Ain’t no stoppin’ us now
We’ve got the groove
There’ve been so many things that have held us down
But now it looks like things are finally comin’ around, yeah
I know we’ve got a long, long way to go, yeah
And were we’ll end up, I don’t know
But we won’t let nothin’ hold us back
(Writer(s): Gene Mcfadden, John Whitehead, Jerry Allen Cohen, Copyright: Mijac Music, Warner-tamerlane Publishing Corp.)