Jobs Report Obliterates Estimates, Wage Growth Is Comin’ In Hot, Unemployment Rate Rises

Since the November jobs report hit on December 7, things have gone to hell in a handbasket, ok?

U.S. stocks put up their worst December since the Great Depression, we witnessed the worst Christmas Eve trading on record, there was a mass exodus of retail money from mutual funds and the only thing that “averted a total disaster” (to paraphrase JPMorgan’s Marko Kolanovic) was the pension rebalancing bid for stocks during the final trading week of 2018, which ended up being the worst year for U.S. equities since the crisis.

Credit spreads are wider, the VIX shot up over 30 and colloquially speaking, folks freaked out amid ongoing recession concerns and incessant insanity inside the Beltway where Donald Trump continues to sink further into a hopeless despotic delirium.



The December jobs report comes on the heels of a blockbuster ADP number, but that “big league” beat was easily overshadowed on Thursday by a truly horrible ISM print that found the manufacturing gauge sinking the most MoM since the depths of the financial crisis.



It’s hard to know what would constitute a “Goldilocks” report on Friday. A miss on the headline risks exacerbating downturn fears even if it might prod the Fed into a dovish relent, but a blockbuster number comes with its own risks as a blowout has the potential to box the Fed in to the extent it underscores the notion that the labor market remains exceptionally tight. The same goes for AHE.

Adding to the confusion (and perhaps subtracting from the importance of payrolls), Powell will try to open his mouth without tanking markets later Friday and Services PMI is on deck too.

For context on jobs, Goldman was looking for 195k going in, above consensus. “Our forecast reflects a modest slowdown in the trend of job growth, and a weather-related boost worth 25k or more, [but] on the negative side, the pull-forward of holiday retail hiring into November could weigh on December job growth in that industry”, the bank wrote in their preview, adding that the unemployment rate should stick at 3.7% while hourly earnings are seen rising 0.3% MoM and 3.0% YoY, “with risks skewed to the upside given favorable calendar effects and a possible rebound in supervisory earnings.”

For whatever it’s worth, BofAML was pretty optimistic versus consensus. “We expect the December employment report to show that nonfarm payrolls increased by 215k”, the bank said, on the way to predicting that the unemployment rate would tick down to 3.6%. The bank also said that while AHE should rise 0.3% MoM, the YoY figure would likely fall to 2.9% “due to unfavorable base effects.”

While the Fed probably realizes that December payrolls could well present yet another “damned if we do, damned if we don’t” conundrum, the Trump administration is probably hoping for a blowout number that helps to resurrect the “MAGA miracle” meme at a time when economists and analysts all agree that the fiscal impulse is likely waning.

Of course Trump already knew what the number was going in and now, so do we. It’s a blowout at 312k on the headline. That’s the biggest gain since February 2018 and well above even the most optimistic estimate.



Additionally, earnings came in hot, with MoM printing 0.4% and YoY rising to a cycle high 3.2% (bottom pane above). Meanwhile, the unemployment rate unexpectedly ticked up to 3.9%, which no economists surveyed predicted. That’s actually good news as it reduces the risk of overheating – or at least on a simple read, which is probably all that’s needed here.

Manufacturing employment jobs jumped 32,000 which was near the top end of estimates.

Estimates and priors

  • Change in Nonfarm Payrolls, est. 183,500, prior 155,000
  • Change in Private Payrolls, est. 185,000, prior 161,000
  • Change in Manufact. Payrolls, est. 20,000, prior 27,000
  • Unemployment Rate, est. 3.7%, prior 3.7%
  • Average Hourly Earnings MoM, est. 0.3%, prior 0.2%
  • Average Hourly Earnings YoY, est. 3.0%, prior 3.1%
  • Average Weekly Hours All Employees, est. 34.5, prior 34.4
  • Labor Force Participation Rate, prior 62.9%
  • Underemployment Rate, prior 7.6%


  • U.S. Dec. Nonfarm Payrolls Rose 312k; Unemp. Rate at 3.9
  • Nonfarm payrolls forecast est. 184k, range 160k-225k from 70 economists surveyed
  • Nonfarm payrolls, net revisions, 58k from prior two months
  • Participation rate 63.1% vs prior 62.9%
  • Avg. hourly earnings 0.4% m/m, est. 0.3%, prior 0.2%
    • Y/y 3.2%, prior 3.1% est. 3.0%
  • Nonfarm private payrolls rose 301k vs prior 173k; est. 185k, range 155k-220k from 31 economists surveyed
  • Manufacturing payrolls rose 32k after rising 27k in the prior month; economists estimated 20k, range -6k to 35k from 20 economists surveyed
  • Unemployment rate 3.9% vs prior 3.7%; est. 3.7%, range 3.6%-3.8% from 68 economists surveyed
  • Underemployment rate 7.6% vs prior 7.6%

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