November Payrolls Jump 228K, Beat Expectations But Wage Growth Disappoints

In a continuation of the recent theme shown by the labor market, the BLS reported that November payrolls rose by a seasonally adjusted 228K, beating expectations of 200K, if lower than October’s downward revised 244K (from 261K) while September was revised up from +18,000to +38,000. With these revisions, employment gains in September and October combined were 3,000 more than previously reported.

There were few surprises in the report, which saw the labor force participation rate flat at 62.7%, near a 30+ year low, while the unemployment rate also remained unchanged at 4.1%, the lowest since Dec 2000.

Some further details:

Nonfarm private payrolls rose 221k vs prior 247k; est. 195k, range 155k-250k from 31 economists surveyed

Manufacturing payrolls rose 31k after rising 23k in the prior month; economists estimated 15k, range 10k to 35k from 19 economists surveyed

Underemployment rate 8% vs prior 7.9%

Change in household employment 57k vs prior -484k

Wall Street’s reactions focused on the upside in the headline print, while noting the miss in hourly earnings.

SEAN LYNCH, CO-HEAD OF GLOBAL EQUITY STRATEGY, WELLS FARGO INVESTMENT INSTITUTE, OMAHA, NEBRASKA:

”Definitely a little bit of a surprise to the upside. The markets are holding on to the early gains that futures were pointing, that maybe says we are closer to a 200,000 jobs number than 150,000, you know we’ve had messy jobs numbers the past couple of months so this confirms a pretty good labor market.

“It should be taken a pretty good sign there wasn’t a snapback because of the hurricanes or anything like that, revisions were up just modestly, too.

“(Wages) were kind of right in line with expectations – 0.2 percent versus 0.3 percent, year over year we are at 2.5 percent so pretty good wage gains but nothing that starts to worry peopleabout inflation. That is the key thing we watch next year as equity investors.

“Unless there was just a total outlier in the number, we have the (Fed) raise coming this month and then we are in line with what the futures market is telling us and that is two for next year. The interesting thing following this data is do they start pricing in another hike because it’s a pretty strong number and as Powell gets his footing do we see the odds of another increase materialize. I’d watch financial today, it will be interesting to see how they do. They have had a strong couple of weeks, we get a strong jobs number here, do you see financials continue to gain strength in this market if it looks like the Fed may be more apt to raise rates here.”