Friday, December 7, 2012

November Employment Report Surprised to the Upside

Well, it appears that the Sandy effect was absent from the November jobs number as BLS reported a 146K gain in NFPs, significantly above the 80K consensus and certainly higher than our 70K.  However, we note that the September and October numbers were revised down by a total of 49K (16K for Sept. and 33K for Oct.)!  In addition, while the 7.7% unemployment rate might sound good, it is likely the result of the participation rate declining to 63.6% (from 63.8% in Oct.) and number of people not in the labor force increasing by 542K.  Let's put it this way, since Nov. 2011 more than 2MM people have left the labor force.
  • The private NFP count increased by 147K, indicating that there were only 1,000 jobs cut in the government sector. 
  • Retail led the way by adding more than 52K jobs as we are approaching Christmas season.  This was also evident in the 13.1K additional wholesale trade jobs and 23K in leisure and hospitality. 
  • Given Obama's victory in the prior month and the increased likelihood of Obamacare being implemented, number of jobs within the health care and social assistance industry rose by 22K. 
  • The 12K increase in jobs within the information industry may be indicating additional IT investments being made by companies to either prepare for growth or become more efficient given the likelihood of the G. W. Bush-era tax cuts coming to an end.
  • There was weakness in construction as jobs in that industry slipped by 20K.  We might see a gradual increase in this one during the Dec. - March period as some rebuilding post-Sandy will likely begin.  It will be a slow process as we are in the winter season.
  • Manufacturing was also weak with a decline of 7K jobs in Nov.  The 11K increase in durable goods jobs was more than offset by the 18K decline in non-durables, such as jobs in the foods sector.
  • Average weekly hours were unchanged, while average hourly earnings increased by 4c. 
  • On the household survey front, again, the unemployment rate dipped 20bps to 7.7%.  The U-6 unemployment rate also declined by 20bps, going to 14.4%. 
  • It appears that a lot of the decline in participation rate and the increase in people no longer being in the labor force came from part-time employees.  Part-time for economic reasons dipped 168K.  114K less people were part-time workers due to bad jobs or business conditions, but the ones that could only find part-time jobs went up by 44K.  Part-time workers because of non-economic reasons declined by 335K.  We think a big chunk of that number was due to people leaving the labor force completely. 

Overall, while the change in NFP was much higher than expected.  It appears impact of Sandy remains to be seen.  We also believe that the 50K+ change in retail was driven by Christmas season and we will likely see that figure come back down for Dec. and Jan.  The S&P futures are up 4.5 points or 0.3%.  Gold and oil futures are pretty much flat. 

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