Perspective on U.S. November Employment Report

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The U.S. added 178,000 to nonfarm payrolls in November, in line with expectations for an increase between 170,000 and 180,000. The unemployment rate, however, fell to 4.6 percent while it was expected to hold steady at 4.9 percent, reflecting more people finding employment and over 400,000 people dropping out of the labor force. Job growth in 2016 has averaged 180,000 per month compared to 229,000 in 2015.

Professional and business services saw employment rise by 63,000 in November, putting gains in this category at 571,000 over the past 12 months. Health care roles also expanded, up by 28,000 in the month with 12-month job creation at 407,000. Construction jobs increased 19,000 with gains over the past three months at 59,000.

Other areas saw little change, with mining (category including the oil industry) gaining 2,000 after gaining 2,000 jobs in October. Employment in construction continued on its recent upward trend in November (up 19,000).

The labor force participation rate declined to 62.7 percent after having risen in each of the two prior months. That was largely on a decline in the civilian labor force.

The number of people considered “marginally attached” to the work force was up 215,000 from a year ago, totaling 1.9 million people – not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months.

The average workweek held steady at 34.4 hours but the average hourly wage declined. In November, average hourly earnings fell 3 cents, taking the year-over-year increase down to 2.5 percent after it had risen to 2.8 percent in October.

Employment figures were revised for both October and September, with September now at 191,000 (208,000 previously) and October now at 142,000 (161,000 previously) for a net decrease of 2,000. That puts the three-month average at 176,000.

Comments: First and foremost, the figures do not alter the expectation that the Fed will increase the range on the Fed funds rate when it meets December 13-14. The unemployment rate at 4.6 is the lowest since August 2007 and could prove difficult to move much lower as that level is viewed as signaling we’re very close to full employment.

The data does have some “worry” points – the fall in the labor force participation rate and the wage decline. The participation rate continues to run at decades-low levels even though it is above year-ago when it stood at 62.5 percent. The big jump in wages seen in October did not get repeated, but averaged over the two months, still should have consumers in relatively good spirits as we head into the key holiday season.

Markets have responded to the data, with government bond yields falling and gold rising initially after the data was released. But outside of the unemployment rate, this doesn’t throw a major degree of uncertainty into the economic picture.

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