All Things in Moderation

Vital Statistics:

Stocks are higher this morning after the jobs report. Bonds and MBS are down.

The economy added 210k jobs in November, which came in below the the Street estimate of 545,000. Since this is the headline number, it will be the focus, however the internals of the report are pretty good. The unemployment rate fell 0.3% to 4.2% while average hourly earnings rose 4.8% on a YOY basis.

The labor force participation rate rose to 61.8% while the employment-population ratio increased to 59.2%. Both numbers are still well below where they were pre-COVID, however. FWIW, there is a pretty big disconnect between the Establishment survey (which asks employers) and the Household survey (which talks to people). Employers reported an increase of 210k jobs while households showed an increase of 1.1 million.

Overall, it shows that the labor market is on the mend, and the increases in wages are no longer just being driven by technical factors. The Great Resignation continues as we saw a record 4.4 million people quit their jobs in September. Overall, the economy is making progress towards full employment, which gives the Fed the wiggle room policy-wise to attack inflation more aggressively.

Bonds sold off on the report, despite the miss on the payroll number. I think the household survey is telling the real story this month, not the establishment survey.

The ISM Services Report hit an all-time high last month, which is another data point that the economy is starting to re-accelerate. Business Activity and Employment were the big drivers of the increase. Interestingly prices are still rising, but the rate of growth is decelerating.

If you look at the statements from businesses, shortages of materials and labor continue to be a constraint, however demand remains strong.

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