Jobs Friday
From BLS: Total nonfarm employment remained largely unchanged in October (+12,000), and the unemployment rate remained unchanged at 4.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment in healthcare and government continued to rise. Temporary emergency services lost jobs. Employment in the industry fell due to strike activities.
Excluding one-off events, manufacturing data is weakening and the housing sector is once again at risk of higher interest rates as the housing market takes off and permitting data is at COVID-19 recession levels today. That said, if you didn’t know the total number was 12,000 with negative revisions, would the 4.1% unemployment rate and 4% wage growth change your mind about the state of the labor market? In my view, the bond market is running ahead of the soft headlines for now and relying on jobless claims, wage growth and unemployment rates.
Here are the latest 12-, 6-, and 3-month averages for payroll data:
- Average over 12 months: 181,000
- Average over six months: 131,000
- Average over 3 months: 104,000
If we divide that average by 138,600 per month, we are slightly below my level of 140,000.
In summary, it can be said that the labor market is becoming weaker, but not breaking down. The critical labor sectors I focus on when considering whether we are in an expansion or a recession are housing workers and manufacturing employment. Manufacturing data has been weaker for three months now, even excluding the Boeing strike, and the number of residential construction workers is barely growing.
Now that housing starts and permits are at COVID-19 recession levels, higher rates are putting that group at risk, as I discussed on CNBC months ago. But to explain the bond market action today, we need to think of 4% wage growth, a 4.1% unemployment rate, falling unemployment benefits figures and an economy growing above trend. I hope this will clear up some of the confusion about why bond rates and mortgage rates aren’t moving lower today.
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