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Blockbuster Jobs Numbers Don't Scare the Market!

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Friday, January 4, 2019

For those of us who may have concluded yesterday’s private-sector payroll report from Automatic Data Processing (ADP - Free Report) represented an outlier number at 271K (well above the 180K or so expected), we see an even bigger December jobs number from the non-farm payroll figures this morning from the Bureau of Labor Statistics (BLS). A whopping 312K new jobs were reportedly generated in December, way — way! — above the 182K consensus estimate, and more than double the originally reported November headline number of 155K.

Not only that, but look beneath the headline and see every other major metric in this BLS report putting up a significant positive surprise, as well: Average Hourly Earnings rose 11 cents per hour, or +0.4% month over month, above the +0.3% expected and the +0.2% originally reported for November; revisions to the past two months — November from 155K to 176K, and October from 237K to 274K — pushing jobs gains to an average of 254K over the past three months; and, importantly, the Labor Force Participation Rate rose to 63.1% from 62.9% last time around. Impressive strength for the labor market and the economy as a whole, everywhere you look!

The only “bad” headline number would be the Unemployment Rate, which rose 20 basis points to 3.9% last month. But considering the participation rate is up — indicating more people getting off the couch, finding and landing new jobs — it would stand to reason more people being counted in the potential workforce overall might lead to higher rates of unemployment overall. Unemployed adult men grew month over month, and the amount of people overall leaving their jobs (in hopes of finding a better one?) was higher than expected.

By sector, Healthcare brought in 50K new jobs in December — the most recorded on a monthly basis in the BLS’ history. This was followed by Restaurants & Bars having brought 41K new jobs last month, with Construction bringing an impressive 38K. Overall 301K private sector jobs came to the labor market in the past month, with government jobs picking up the remainder.

Normally, analysts tend to look askew at workforce numbers generated during the holiday shopping season, rife as it tends to be with temporary retail, transportation and warehouse jobs. But as these numbers demonstrate, growth in the labor market is coming from elsewhere. This is not to suggest we can expect 300K new jobs every month — the run rate may not even be as high overall as the 250K+ three-month average we’ve seen — but for those who had begun to think the labor market was poised to shrink somewhat one year removed from the giant corporate tax cut, they’d do well to reassess their findings today.

That the pre-market has taken these boffo figures in stride is also noteworthy: often times of late, hotter-than-expected economic growth numbers have led investors to worry about a reaction from the Fed in terms of interest rate hikes. For now, we see the Dow 280 points in the green, the Nasdaq up 90 and the S&P 500 33 points higher. If market participants are concerned the Fed is going to re-re-consider its one or two rate-hike scenario this year (previously, many had speculated three or four hikes for 2019), they’re not showing it currently.

Helpfully, we have an already-scheduled panel an hour from now or so consisting of Fed Chair Jerome Powell, flanked by former Fed Chairs Janet Yellen and Ben Bernanke. This will be an excellent opportunity to help put into perspective what the Federal Reserve is currently thinking about its dual mandate — full employment (check!) and controlled inflation (check… so far) — through the prism of the Fed funds rate, currently in a range of 2.25%-2.50%. Especially considering how much the Fed has been the subject of harsh vilification by President Trump and others, today’s forum offers a terrific chance to clear the air.

Mark Vickery
Senior Editor

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