Friday, December 6, 2013

+203K change in NFP (Nov. '13) ...

We were certainly off-base calling for a mere +100K net change in Nov. NFP, as the actual figure was +203K, also higher than the consensus.  We are seeing signs of daylight within manufacturing; from the modestly higher ISM manufacturing new product, orders, production, and employment sub-indexes, to the Nov. BLS employment report.  The best part of the report (if true!) was the 2% Y/Y increase in average hourly earnings; which is significantly higher than 1% annual change that we saw in CPI for October.  The November CPI number will become available on 12/17.

  • Manufacturing surprised us as it added 27K jobs.  This was not necessarily in-line with other employment data from the manufacturing sector.  Of that 27K, the durable goods to non-durable goods ratio was 17/10 or nearly 2 to 1.  Jobs related to motor vehicles and parts led the way within durable goods; possibly good news for the auto industry.  Jobs within the manufacturing side of apparel declined for the third consecutive month.  The 7.8K jump in food manufacturing more than made up for decline in apparel.
  • The biggest chunk of the 203K, 152K, came from professional services.  Retail trade jobs increased led by jobs at general merchandise stores; sporting goods, hobby, and music stores; and auto and parts dealers.  We note that clothing stores added 2K, which was expected given the upcoming Christmas Holiday.  Jobs within transportation and warehousing also had a nice jump, led by couriers and messengers, and truck transportation.  We wonder how Amazon's (AMZN) shipping-drone ('revealed' in last week's 60-Minutes on CBS) will impact those jobs in 3 - 4 years down the road! :) 
  • Within the information sector, approx. 2.1K telco jobs were lost, partially offset by 700 jobs added in publishing.  As fear of continuing rise in interest rates persists, 3K jobs were lost in the financial sector.  
  • In addition, while 2.1K jobs were added to the overall real estate and rental/leasing services space, we note that those new jobs were all in rental/leasing (2.9K), partially offset by slight decline in real estate.  
  • As the end of the year is approaching, not surprisingly, there were job gains in accounting and bookkeeping services.  What stood out were the 14.1K new jobs in the employment services and 16.4K in temp services.  
  • Jobs at restaurants and bars increased 17.9K, while health care jobs went up 28.4K. 
  • Average weekly hours crept up slightly to 34.5 from 34.4.
  • State and local governments added 14K jobs, with nearly half offset by the 7K decline in federal government jobs.  We do think that much more government jobs (local, state, and federal) will be added in 2014.   
  • Most of the stats regarding duration of employment and reasons for being employed part-time improved in Nov.
  • Lastly, the labor force participation rate finally increased, by mere 20bps, which, along with a nice increase in NFPs, helped the U-6 unemployment rate decline by 60bps to 13.2%.  The 'official' rate declined by 30bps to 7.0%.

We note that these numbers, which exceeded all expectations, do not change our view regarding BCOR, given the Company's TaxAct business.  Our revenue model for TaxAct had assumed average NFP monthly change of 200K for 2013.  Officially, that figure stands at 188.5K per month, with December to be added next month.  State of employment in 2013 provides more color regarding BCOR's Q1 and Q2 2014 TaxAct revenues.  

The market responded well to the job numbers, with S&P 500 closing up 1.1% for the day.  We note that the safer sectors led the way in today's rally, with staples, utilities and health-care increasing more than 1.3%.  While the financial sector also increased by more than 1.3%, the same cannot be said for technology and consumer discretionary.  They went up 0.7% and 0.8%, respectively.  We wish everyone a great weekend.  Yes, we even send our best wishes to Robinson Cano.  It appears that Cano and his agent do not value the Yankees' pinstripe as much as the Yankees and their fans (incl. us) expected.  Cano signed a 10-year, $240MM deal with the Seattle Mariners.  Even after losing Cano, we still have faith in our Yankees!

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