After the constructive jobs report in October, non-farm payrolls rose 146k in November (consensus 85k) which is close to the average monthly gain since July (158k). Meanwhile September – October was revised down by 49k so taking the revisions into account the employment level in November was broadly in line with the market view. Meanwhile manufacturing employment dropped 7k (consensus -4k) and construction plunged 20k on hurricane effects we would like to assume although the BLS says that Hurricane Sandy did not substantively impact the national employment and unemployment estimates for November. Be that as it may “out of work due to bad weather” was elevated indeed at 369k not to mention that the BLS always regards changes of less than 100k as insignificant to begin with.
The biggest surprise to the upside was the drop in the unemployment rate to 7.7 percent from 7.9 percent in October. But since employment actually fell according to the Household survey (-122k) the drop in the unemployment rate reflects more people outside the labor force; indeed people out of the labor force rose by 540k in November. The labor force participation rate declined by 0.2 percentage points to 63.6 percent, offsetting the improvement in October. Be that as it may, the underemployment rate (U6) edged lower as well but is still very elevated at 14.4 percent or 22.5 million frustrated workers. In the bigger picture context around half of the eight million jobs lost in the 2008-09 recession has been recouped which is why we believe the Fed will continue acting aggressively.
Meanwhile diffusion measures of payrolls revealed that 41 percent of private sector firms either cut their staff outright or held them steady in November compared to 37 percent in October. In the manufacturing sector 52.5 percent cut their staff requirements, up from 43.2 in October. Temporary help services, another leading employment indicator, actually rose by 18k so the news on the future employment front was actually mixed.
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