U.S. NFP: A Gain of 178K Jobs — Is It Good Enough for the Fed?

The U.S. non-farm payroll came in line with market estimates (177K) as there were 178K jobs added during the month of November: The ADP estimated a gain of 147K jobs and the market expect a gain of 216K. And unemployment rate dropped to 4.6%. Despite these solid numbers, the jobs report also showed a month over month decline in wages and an annual growth of 2.5%, which could be one the key figures in holding back the Fed from turning more hawkish in the December meeting.

The U6 unemployment measurement, a broader measure of unemployment, declined again to its lowest level in months of 9.3%. In terms of revisions, there was a total downward revision of 2K for October and September combined.

In November, the rate of U.S. unemployment was 0.4 percent points below the rate recorded in November 2015.

The number of unemployed persons (7.400 million) dropped by 385K in November compared to the previous month. And the civilian labor force also decreased by 226K. So there was a decline in number of people participating in the labor force and in the number of unemployed. In the end, the participation rate edged down to 62.7%.

nfp-and-unemp-2016

Finally, wages declined in November compared to October – the hourly earnings reached $25.89 per hour — a fall of 3 cent or 0.1%, month over month –lower than expected (exp. were for 0.2% gain); wages grew at an annual rate of 2.5%, year on year – a steady pace but lower than in October.

Takeaway

This was another solid NFP report that showed a steady growth in jobs and with a very low unemployment rate. The only problem remains the low growth in wages that isn’t picking up and the slow decline in the participation rate. This report isn’t likely to stop the Fed from raising its cash rate in December but it could also make the Fed pause and reconsider its steps moving forward. In any case, this could reduce the odds of the Fed revising up its outlook of its cash rate in 2017 – currently stands on 2 hikes.

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