US Private Employment Picks Up In November

US companies hired 156,000 workers last month, according to this morning’s update from the Labor Dept. Last month’s seasonally adjusted gain reflects a modest improvement over October’s sluggish 135,000 increase. But in contrast with firmer annual results in ADP’s estimate of last month’s employment trend in the private sector, the government’s data translates into another round of softer year-over-year growth.

Company payrolls gained 1.68% for the year through November, the softest increase in over five years. The weaker trend last month is a reminder that the labor market’s forward momentum continues to downshift, or so Washington’s figures advise. This is hardly news, however: the year-over-year change has continued to tick lower since February 2015, when private payrolls peaked at a post-recession annual gain of 2.58%. Although the economy is still minting new jobs at a respectable rate, the official numbers imply that the growth cycle for jobs is winding down.


Nonetheless, today’s update is probably strong enough to keep the Federal Reserve on track for raising interest rates on Dec. 14, when the central bank releases a new monetary policy statement. Fed funds futures this morning (ahead of the payrolls report) were pricing in a roughly 95% probability of rate hike this month, based on CME data, and the moderate increase in payrolls last month doesn’t appear to be a smoking gun that will stay the Fed’s hand.

“You have to look at the underlying trend and that’s still pretty good,” Scott Brown, chief economist for Raymond James Financial, told Bloomberg before today’s report. “We’re at a time of the year when there are a lot of seasonal issues. Investors are looking well beyond, at what’s going to happen in 2017.”

Nonetheless, today’s numbers present a weak profile of the labour market’s trend compared with Wednesday’s stronger data via ADP’s release, which estimated year-over-year private-sector job growth at firmer 1.86% gain—an improvement from a 1.83% increase in October. According to this dataset, job growth may be re-accelerating; the Labor Dept’s figures, however, beg to differ.

Which report is right? It’s too soon to tell, although perhaps Monday’s update of the Fed’s Labor Market Conditions Index for November will provide some guidance.

Meantime, job growth continues to expand at a moderate rate, but it’s open for debate about what’s brewing (or not) for 2016. Nonetheless, at least one dismal scientist thinks the numbers still support a new round of monetary tightening that lifts the Fed funds rate above its current 0.25%-to-0.50% target range. Paul Ashworth at Capital Economics advises via The Wall Street Journal that “a December rate hike is coming and, assuming that we see a major fiscal stimulus passed in the first half of next year, we expect an additional 100 basis points of tightening from the Fed next year, taking the Fed funds target range to between 1.50% and 1.75% by end-2017.”