Christmas Comes Early for Employment Statistics

There'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 constant—with weak growth from the household survey not unexpected after last month’s extremely high gain—but 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.