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U.S. employers added 155,000 jobs in November, less than expected, and the unemployment rate held at 3.7%.
This is Greg Ip, the WSJ’s chief economics commentator, to take you through today’s jobs report.
CAUTION SIGNS
Job growth, at 155,000, in November was strong by any objective standard. Still, it fell short of the 198,000 economists expected and the three-month average, at 170,000, was the lowest in a year. It’s also a noteworthy sign of economic deceleration. There have already been hints of that in rising claims for unemployment insurance, slumping housing activity, and in markets: stocks have been grinding lower and the bond yield curve is nearing an “inversion,” a popular leading indicator of recession. Macroeconomic Advisers has marked their forecast for current-quarter growth down from 3% in September to 2.3% now. For now, it’s consistent with an economy slowing to a more sustainable pace, but the dissipating momentum raises caution flags.
KEY THEMES
RECESSION? NOT YET BUT WATCH THIS SPACE
This is still looks more like a slowdown, but a recession can no longer be dismissed. J.P. Morgan puts the odds of recession beginning in the next 12 months at 35% based on the latest economic data, 42% based on financial markets, and 41% based on the yield curve. Don’t take too much comfort from the fact employment is still growing; it only turns negative when a recession is under way. A year before each of the last recessions began, job growth was comparable to where it is now.
RATE HIKE STILL ON FOR DECEMBER, CAUTION THEREAFTER
Stock index futures and bond yields initially slipped on the news. At 11:30 a.m., the Dow was down more than 300 points and the 10 year Treasury yield hovered near Thursday’s close of 2.89%. The jobs data should keep the Federal Reserve on track to raise interest rates at its Dec. 19 meeting and move toward a cautious approach to rate increases next year, Nick Timiraos reports. The job gain easily exceeded the 100,000 pace needed to match growth of the working age population, and was spread across industries. Fed officials want slow enough hiring for unemployment to stabilize near its current 3.7%—in September, that’s where they thought it would end the year. That would tamp down worries of unsustainable growth and overheating.
DISAPPOINTING DETAILS
The details of the jobs report were also disappointing. Prior months’ job gains were revised down by 12,000. Hourly earnings rose just 0.22%, less than expected. Still, they were up 3.1% from a year earlier, the first time in nine years the annual increase topped 3% for two straight months. The broader U-6 “underemployment rate” rose to 7.6% from 7.4%. The labor-force participation rate—those working or looking for work—held steady at 62.9%, only modestly above multidecade lows touched in 2015, Eric Morath and Paul Kiernan report.
WHAT ECONOMISTS ARE SAYING
Bank of America Merrill Lynch: “Some of the softening likely owes to reversion to the trend as October’s job gains were likely boosted by workers returning back to work after hurricanes affected employment activity in the South in September.” Barclays: “November was fairly cold relative to average and adverse weather appeared to slow employment in leisure and hospitality and construction…weather could have taken about 25k off of November employment.” Capital Economics: “Economic growth is gradually slowing back towards its potential pace. There is nothing here to suggest the economy is suffering a more sudden downturn.” Oxford Economics: “We expect payrolls to moderate to a more sustainable 150,000 pace in 2019 as economic momentum gradually cools. This should continue to pressure the unemployment rate lower towards 3.5% by the end of 2019 and keep upward pressure on wage growth.”
RELATED
Hiring Slows as Wages Grow, Unemployment Holds at Multidecade Low
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Analysis: Jobs Report Keeps December Rate Increase on Track
Key Takeaways From the November Jobs Report
from Real Time Economics https://ift.tt/2L1gdSR
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