Jobs Report Mixed As Headline Beats, Earnings Miss

Ok, who’s ready for jobs?

As a reminder, this comes hot on the heels of an averted government shutdown, progress on tax reform, a late Thursday headline about infrastructure, upbeat trade data out of China, progress on Brexit, and ahead of an expected Fed hike. This is an interesting setup given Thursday’s reprieve from the inexorable curve flattening. “Yesterday was just the 10th trading day of the year when two-year yields fell as 10-year yields rose, and just the fourth since mid-year,” Bloomberg’s Cameron Crise notes this morning, adding that “if wages manage to meet expectations and more flatteners are taken off, perhaps that will be the trigger to send 10s toward 2.50%, where they ‘should’ be once the Fed hikes rates.”

It’s useful to pan out and look at the dollar and 10Y yields since last Friday’s Flynn bombshell just to get a lay of the land:

Going in, consensus was 195k for November on the NFP headline, and notably, hurricane effects should have faded materially at this point. For their part, BofAML was at 210k. Goldman went with 225k and that was based on an early holiday, “some additional” hurricane normalization, and some Puerto Ricans thrown in there for good measure. To wit:

We estimate nonfarm payrolls rose 225k in November, compared to a consensus of +200k. November job growth likely benefited from additional normalization in hurricane-affected regions. Additionally, the early Thanksgiving this year is likely to boost retail job growth, as relatively more of the holiday hiring will occur before the survey week. The arrival of over 200k Puerto Ricans in Florida (following Hurricane Maria) could also increase payrolls this month. We estimate a stable unemployment rate (4.1%), as the downward trend (-0.3pp over the last three months) seems due for a pause. For average hourly earnings, we estimate +0.3% with upside risk, reflecting somewhat favorable calendar effects and a boost from the unwind of hurricane-related distortions.

As mentioned above, the AHE print will be watched closely, especially ahead of the Fed. It’s the only print that matters anymore on jobs days. No one cares about the NFP number except for Donald Trump’s Twitter feed.

“We forecast a bounce in average hourly earnings to 0.3% m/m (2.7% y/y) and expect average weekly hours to remain unchanged at 34.4,” Barclays wrote on Sunday evening.

“Average hourly earnings data drove or helped drive market reaction to the past five employment reports,” Bloomberg reminds you.

Here’s consensus:

NFP: +195,000, prior 261,000
Unemployment Rate, est. 4.1%, prior 4.1%
Average Hourly Earnings MoM, est. 0.3%, prior 0.0%
Average Hourly Earnings YoY, est. 2.7%, prior 2.4%
Labor Force Participation Rate, prior 62.7%
Underemployment Rate, prior 7.9%

Here are the numbers:

NFP: +228k
Nonfarm payrolls, net revisions, 3k from prior two months
Participation rate 62.7% vs prior 62.7%
Avg. hourly earnings 0.2% m/m, est. 0.3%, prior -0.1%
Y/y 2.5%, prior 2.3% est. 2.7%
Unemployment rate 4.1% vs prior 4.1%; est. 4.1%, range 3.9%-4.3% from 75 economists surveyed
Participation rate 62.7% vs prior 62.7%