The employment situation is a set of labor market indicators. The unemployment rate measures the number of unemployed as a percentage of the labor force. Nonfarm payroll employment counts the number of paid employees working part-time or full-time in the nation's business and government establishments. The average workweek reflects the number of hours worked in the nonfarm sector. Average hourly earnings reveal the basic hourly rate for major industries as indicated in nonfarm payrolls. Why Investors Care
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Highlights
Non-farm payroll rose an as-expected 215,000 in November with net revisions to prior months adding another 13,000. The results are strong but expected, with both bonds and the dollar little changed after a choppy initial reaction.
Hurricane effects are diminishing. The Labor Department said monthly payroll growth is now back to pre-hurricane trend and that it has dropped special estimation procedures. It also noted that half of the 900,000 workers who fled because of hurricanes have now returned.
Despite a rise in the number of unemployed, the unemployment rate was unchanged at 5.0%, also an expected result. But the employment-to-population ratio, a wider measure of participation, continues to disappoint, dipping a tenth to 62.8%.
Average hourly earnings rose 0.2% for 3.2% year-on-year, the highest annual rate in 2-1/2 years. But risk of wage-push inflation is mitigated a bit by a 6-minute decline in the workweek, a dip that does not point to rising pressures on capacity or pressure on employers to add employees.
Construction was a leading sector, adding 37,000 jobs in the month and boosted in part by hurricane rebuilding. Restaurants, benefiting from month-to-month rehiring after the storms, soared 38,500. Manufacturing was another big positive in the report, rising 11,000 and posting a rare back-to-back gain on October's 15,000 increase. Professional & business services, financial activities, government and retail trade all posted gains. The auto sector was notably weak, with manufacturing down 2,000 and services down 6,000.
The jobs report sets the tone for coming indicators, pointing here to strength in the weeks ahead -- a plus for stocks, a plus for the dollar, and a minus for bonds.
Nonfarm payroll employment increased 56,000 in October. This represents some rebound after hurricane-restrained employment growth in September, but still shows a sluggish picture over the August to October period. The civilian unemployment rate dipped 0.1 percentage point to 5.0 percent in October. Many market players had worried about last month's hike in hourly earnings and will be looking at earnings growth in November particularly closely.
Nonfarm payrolls Consensus Forecast for Nov 05: 225,000
Range: 180,000 to 275,000
Unemployment rate Consensus Forecast for Nov 05: 5.0 percent
Range: 4.9 to 5.0 percent
Average workweek Consensus Forecast for Nov 05: 33.8 hours
Range: 33.8 to 33.8 hours
Average hourly earnings Consensus Forecast for Nov 05: 0.2 percent
Range: 0.1 to 0.3 percent
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During the mature phase of an economic expansion, monthly payrolls gains of 150,000 or so are considered relatively healthy. In the early stages of recovery though, gains are expected to surpass 250,000 per month. |
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The civilian unemployment rate is a lagging indicator of economic activity. During a recession, many people leave the labor force entirely, so the jobless rate may not increase as much as expected. This means that the jobless rate may continue to increase in the early stages of recovery because more people are returning to the labor force as they believe they will be able to find work. The civilian unemployment rate tends towards greater stability than payroll employment on a monthly basis. It reveals the degree to which labor resources are utilized in the economy. |
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