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November NFP Report

12/09/2013

Last Friday morning, December 6, the Labor Department released the November nonfarm payrolls report.

Headline Figures

  • November nonfarm payrolls rose 203,000, ahead of consensus estimates for 185,000 and better than last month’s 200,000

o   October nonfarm payrolls was revised lower from 204,000 to 200,000

  • November private payrolls fell to 196,000 from last month’s 214,000

o   October private payrolls were revised higher from 212,000 to 214,000

  • The unemployment rate (Figure 1) in November fell to 7.023% from 7.280% in October

 Composition of the Report

  • September nonfarm payrolls were revised higher to 175,000 from a previously reported 163,000
  • The unemployment rate at 7.0% is at its lowest level since November 2008
  • The labor force participation rate rose to 63.0% from 62.8%
  • Household measure of employment rose 818,000
  • The underemployment rate fell to 13.2% from 13.8%
  • Average weekly hours rose to 34.5 in November from 34.4 in October
  • Average hourly earnings rose 0.2% month on month
  • Average hourly earnings rose 2.0% year on year
  • Manufacturing payrolls rose 27,000 in November from 19,000 in October
  • Federal government payrolls fell 7,000, the sixth consecutive month of declines
  • Leisure & hospitality fell from 49,000 in October to 17,000 in November
  • Trade & transport rose to 60,000 from October’s 41,000


Monthly Average Nonfarm Payrolls Prior 10 Years

2013 on pace for the best year since 2005

2004

2005

2006

2007

2008

168,250

207,000

172,580

92,920

-301,420

2009

2010

2011

2012

2013

-421,000

85,175

175,250

182,750

188,550

Source: U.S. Labor Department

 

COMMENTARY: The November nonfarm payroll report continues the series of better-than-expected domestic economic news, and clearly increases the chances for the initiation of Fed tapering at the December 17-18 FOMC meeting. I would characterize the chances are at 50/50, rising from 25/75 just one month ago.

More importantly, investors should understand that the trend for recent economic data is not only improving but also recording in each instance better-than-consensus estimates. In an environment in which consensus estimates are below the actual economic data, it is difficult to envision a “bubble” environment as is currently being bantered for risk assets.

Friday’s post-payroll trading witnessed the 10-year Treasury yield (Figure 2) reach 2.9286%, its highest level since September 13. However, trading was orderly and by the day’s end the 10-year yield closed down on the session at 2.8553%. Good news has become good news and markets are responding without significant volatility.

Figure 1 U.S. Unemployment Rate, 2008-2013

Source: Bloomberg

Figure 2 U.S. 10-Year Treasury Yield 2013

Source: Bloomberg

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