4.6% Unemployment–178,000 Payroll Jobs in November

Popular Economics Weekly

Nonfarm payrolls rose 178,000 in November to just beat out expectations with revisions no factor, says Econoday. A sharp downward revision to October, now at 142,000, was offset by a nearly as sharp upward revision to September, now at 208,000. And the unemployment rate fell a very sharp 3 tenths to 4.6 percent for the lowest reading in nine years, since August 2007.

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Graph: Marketwatch

But the dip in the unemployment rate is tied, not to greater growth in employment, but to a dip in the participation rate, down 1 tenth to 62.7 percent, and drop in the labor force of 226,000 (I.e., that many quit or stopped looking for work.)

And a headline negative in the report is a slight drop of 0.1 percent decline in average hourly earnings, the first negative reading of the year and more than reversing October’s very strong 0.4 percent gain and driving down the year-on-year rate from a cycle high of 2.8 percent back down to 2.5 percent where it last was in August. But Wrightson-ICAP believes this was due to a shorter work month, whereas December’s longer month will probably boost it up to 3.0 percent.

Payrolls growth was led in November by another major gain for professional & services, up 63,000, and a 14,000 gain for the temporary help subcomponent. Gains in these readings point to demand for short-term labor in lieu of finding full-time labor. Construction is another positive, up 19,000 and reflecting strength in residential building. Construction over the past 3 months added 59,000 jobs, largely in residential construction.

This highlights the boost in new-home construction I wrote about in an earlier column. Housing starts surged 25.5 percent in October to a 1.323 million annualized rate. This is the best rate of the cycle since August 2007 with the monthly percentage gain the strongest since 1982. It and other recent good news, such as much higher retail sales, could mean something like a 4 percent GDP growth rate in Q4 this year.

In a side note, housing construction is booming because housing prices are accelerating, according to Zillow and the S&P Housing Price Index. The September Case-Shiller national index is expected to grow 5.7 percent year-over-year and 0.8 percent month-to-month (seasonally adjusted), even with the pace of monthly growth and up from 5.5 percent annual growth pace set in September.

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Graph: Calculated Risk

And in the payrolls report, the so-called U-6 component of those that work part time but want to work fulltime declined to 5.7 million, the lowest total since 2008. And governments also added 22,000 payroll jobs, another sign of hiring strength, as governments haven’t yet made the 700,000 jobs lost in the Great Recession.

A negative is an 8,000 decline in retail which indicates that retailers are not gearing up much for the holidays. But that may be because of higher online retail sales. Thus far in 2016, employment growth has averaged 180,000 per month, compared with an average monthly increase of 229,000 in 2015.

The pundits are saying we now can expect the Fed to raise their short term rates at least 0.25 percent this month. Stay tuned for their next and last FOMC meeting this year, on December 13-14, or it may even be sooner, like in the coming week?

Harlan Green © 2016

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

About populareconomicsblog

Harlan Green is editor/publisher of PopularEconomics.com, and content provider of 3 weekly columns to various blogs--Popular Economics Weekly and The Huffington Post
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