The Independent Market Observer

Christmas Comes Early for Employment Statistics

Posted by Brad McMillan, CFA®, CFP®

Find me on:

This entry was posted on Dec 5, 2014 12:29:00 PM

and tagged In the News

Leave a comment

EmploymentThere's been some trepidation recently about the November jobs report. Amid signs of weakness, pullbacks on various stats, and problems in the rest of the world, most forecasters were backing off on their earlier estimates, just in case.

They should have doubled down. Today’s top-level employment numbers are better than almost anyone expected. And the underlying data, which addresses some ongoing concerns about wage growth, is even better. Overall, it’s a very strong report.

A jolly jobs picture

The stats say it all:

  • Top-line, total jobs increased by 321,000, the highest level since the first quarter of 2012.
  • We are now in the tenth month of over-200,000 job creation, the longest streak since 1995.
  • The past three months have seen total job creation of 865,000, the highest level since 1999.
  • For 2014 so far, the economy has added 2,549,000 jobs, the highest level since 2000—even with one month yet to go and, if you remember, a very weak first quarter.

Any way you look at it, we are at boom levels from a job-creation standpoint. Both in terms of the number and the consistency of the gains, we haven’t seen anything like this since the late 1990s. (Even the mid-2000s weren’t as good.) The unemployment rate remained constantwith weak growth from the household survey not unexpected after last month’s extremely high gainbut the underemployment rate declined to a six-year low.

Job creation is solid and accelerating, but we kind of knew that already. It’s the details that make these reports even more encouraging. Even as the number of jobs increased, existing employees were working harder: the average weekly hours worked figure rose to 34.6 from 34.5—back to levels of the mid-2000s, and just below all-time highs. Labor demand was growing faster than even the strong job numbers suggest.

The last piece of the puzzle, wage growth, also posted some gains (finally), with the monthly figure rising to 0.4 percent from 0.1 percent. The increase is even more significant given that average wages faced a headwind from high levels of seasonal retail hiring, which typically has lower wages.

But what will the Fed make of the good news?

Overall, you really couldn’t ask much more from an employment report. The recovery is on track and continues to accelerate. Wage growth, the major area of concern, is finally showing signs of movement—which should, in turn, boost the rest of the economy.

The ball now moves to the Federal Reserve’s court. Fed members have been skittish about the solidity of the recovery, but these numbers (especially wage growth) make the downside scenarios much less probable. They also raise the probability of an interest rate hike happening sooner rather than later. As I’ve said before, on balance, this would probably be good for the economy, taking us one more step closer to normal.


Subscribe via Email

Crash-Test Investing

Hot Topics



New Call-to-action

Conversations

Archives

see all

Subscribe


Disclosure

The information on this website is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. All indices are unmanaged and investors cannot invest directly in an index.

The MSCI EAFE (Europe, Australia, Far East) Index is a free float‐adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Index consists of 21 developed market country indices.

One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.

The VIX (CBOE Volatility Index) measures the market’s expectation of 30-day volatility across a wide range of S&P 500 options.

The forward price-to-earnings (P/E) ratio divides the current share price of the index by its estimated future earnings.

Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided on these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption by Commonwealth of any kind. You should consult with a financial advisor regarding your specific situation.

Member FINRASIPC

Please review our Terms of Use

Commonwealth Financial Network®