– December 2, 2016
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A mixed November jobs report suggests the economic expansion continues to grind ahead and the labor market continues to tighten, but wage growth faltered.

A surprisingly large and somewhat misleading drop in the unemployment rate, to 4.6 percent, was the result of job creation and people leaving the workforce. Average hourly earnings fell 0.1 percent in November after good gains in October and September, leading to a year-over-year growth rate of 2.5 percent.

Still, there is enough favorable data in this report and other economic reports to make a December rate hike highly probable. However, the Fed is likely to continue on a path of very gradual rate increases in the future.

The November employment report showed mixed signals, with the economy adding 178,000 jobs for the month; 156,000 of them were from the private sector. The three-month average stands at 176,000 jobs per month while the 12-month average is 188,000.

All of the increase in private payrolls came from private services (+139,000), led by Professional & Business Services (+63,000), Education & Health Care (+44,000), and Leisure and Hospitality (+29,000).

Retailing jobs declined by 8,300 after falling 8,900 in October, while financial employment rose by 6,000. Goods producing industries gained 17,000, with construction up 19,000, manufacturing down 4,000, and mining up 2,000.

Wages were down 0.1 percent for the month but up 2.5 percent over the past 12 months. The length of the average workweek was unchanged at 34.4 hours.  

When hours are combined with payroll gains and wages, the index of aggregate weekly payrolls, a proxy for take-home pay, was unchanged in November and is up 3.9 percent over the past 12 months – close to the multiyear average around 4 percent.

The unemployment rate ticked down to 4.6 as the participation rate fell to 62.7 from 62.8 percent in October. The broader U-6 underemployment rate fell to 9.3 percent.

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Robert Hughes

listpg_hughes Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.
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