Jobs Report Mostly Positive But LFPR and Earnings Decline

The much anticipated November Employment Situation Report was released by the Bureau of Labor Statistics, this morning. The "jobs report" is issued monthly and has a major impact on financial markets worldwide.

This morning's report offered mixed news, however.  The key takeaways are:

• Unemployment declined to 4.6%. That's below the 4.9% consensus estimate.
• The Civilian Labor Force Participation Rate declined to 62.7%.  
• Number of people employed part time for economic reasons is unchanged at 5.7 million.
• Number of people marginally attached to the labor force increased by 215,000.
• Number of discouraged workers remains unchanged at 591,000.
• Total NonFarm Payroll Employment rose by 178,000 versus a 170,000 consensus estimate.
• Professional and Business Services rose 63,000.
• Health Care Employment rose 28,000.
• Construction Employment rose 19,000.
• Employment in other major industries remains unchanged.
• The average workweek for all employees was unchanged at 34.4 hours.
• The average hourly earnings for all employees declined by 3 cents to $25.89.

Despite the drop in Labor Force Participation Rate and the drop in Hourly Earnings, the report was primarily mostly positive.  As we've stated numerous times, we prefer to focus on the LFPR instead of the published Unemployment Rate since the LFPR more accurately reflects the number of Americans currently out of work.

The rise in Professional and Business Services, Health Care, and Construction are marginally encouraging, however the increase of only 178,000 across all industries was well below the whisper numbers circulating yesterday.  Job growth, while gradually increasing in 2016, is still well below the pace needed to sustain GDP growth in the 3% to 4% range.

The average hourly earnings survey did drop by 3 cents for all employees, however it increased by 2 cents for all private sector production and non-supervisory employees.  For the year, hour earnings is still up 2.5%.

What all this indicates is that the US economy continues to grow, however that growth remains slow.  With regards to the FOMC decision in two weeks, this report is unlikely to influence them in either direction, although from a PR perspective, I would not be surprised to see Fed Chair Janet Yellen latch onto the 4.6% number in her post-meeting announcement.  A "5%" target was oft cited in 2015 as part of the criteria used by the Fed in setting interest rate policy.

Since this morning's announcement, the Dow, Nasdaq, and S&P futures have all fallen into negative territory, although not by any significant margin.  The open, today, looks to be flat to slightly down, however there appears to be nothing in the Jobs Report to unnecessarily either spook or excite traders heading into this weekend.

Next up in the major news cycle is the Italy Constitutional Referendum set for this Sunday, followed by next Thursday's ECB meeting.  Keep an eye on both as they have the potential to rock international markets.

Happy Trading.