Jobs Report Misses Lowest Estimate, Wage Inflation Cools

Ok, here comes payrolls.

As noted earlier on Friday, the narrative around both the headline print and the AHE number have changed materially over the past several days.

The jobs report will be a test of the new “Fed pause” narrative. A hotter-than-expected AHE print would undermine the WSJ “scoop” and perhaps undercut the assumption that inflation is expected to stay muted, giving the Fed room to lean dovish amid ongoing turmoil in financial markets.

Looking in the rearview, the October report was a blockbuster and Trump could use a solid November report in light of recently soft incoming data stateside. The average hourly earnings print will invariably be juxtaposed against the Fed’s newfound dovishness if wage growth comes in hot. We’re sitting at cycle highs there.

(Bloomberg)

Consensus is for another ~200k print on the headline and 3.2% YoY for AHE. For whatever it’s worth, Goldman was a bit cautious coming in as noted last weekend. “We estimate nonfarm payrolls increased 185k in November, compared to its 6-month average pace of +216k”, the bank wrote on Sunday, adding that “underlying job growth may have slowed somewhat, given rising jobless claims, mixed employment surveys, and tighter financial conditions.”

As it turns out, Goldman was right to be on the low end of the range as far as expectations are concerned. The headline number missed, printing 155k, which was below even the lowest estimates.

Mercifully, AHE missed on the MoM number as well, which at least mitigates inflation concerns. The YoY print was inline.

(Bloomberg)

Generally speaking, this looks like further evidence that the U.S. economy is cooling although there will be the usual slicing and dicing of the numbers.

One imagines this will support the Fed’s newly dovish narrative, depending, as it apparently does, on an ongoing deceleration in the domestic economy.

Estimates and priors

• Change in Nonfarm Payrolls, est. 198,000, prior 250,000
• Change in Private Payrolls, est. 198,000, prior 246,000
• Change in Manufact. Payrolls, est. 18,000, prior 32,000
• Unemployment Rate, est. 3.7%, prior 3.7%
• Underemployment Rate, prior 7.4%
• Average Hourly Earnings MoM, est. 0.3%, prior 0.2%
• Average Hourly Earnings YoY, est. 3.1%, prior 3.1%
• Average Weekly Hours All Employees, est. 34.5, prior 34.5
• Labor Force Participation Rate, est. 62.9%, prior 62.9%

Actual

• U.S. Nov. Nonfarm Payrolls Rose 155k; Unemp. Rate at 3.7%
• Nonfarm payrolls forecast est. 198k, range 160k-240k from 75 economists surveyed
• Nonfarm payrolls, net revisions, -12k from prior two months
• Participation rate 62.9% vs prior 62.9%
• Avg. hourly earnings 0.2% m/m, est. 0.3%, prior 0.1%
  • Y/y 3.1%, prior 3.1% est. 3.1%
• Nonfarm private payrolls rose 161k vs prior 251k; est. 198k, range 165k-228k from 32 economists surveyed
• Manufacturing payrolls rose 27k after rising 26k in the prior month; economists estimated 18k, range -6k to 26k from 21 economists surveyed
• Unemployment rate 3.7% vs prior 3.7%; est. 3.7%, range 3.6%-3.8% from 72 economists surveyed
• Underemployment rate 7.6% vs prior 7.4%
• Change in household employment 233k vs prior 600