labor Data Analysis

January 8th, 2016 10:24 am | by John Jansen |

Via Millan Mulraine at TDSecurities:

TD SECURITIES DATAFLASH                   

US:  Strong Jobs Growth Keeps March Hike in Play

·         The US economy added jobs at a very brisk 292K pace, bettering the market consensus for a more modest 200K rise.

·         Positive net revisions, rising participation rate and strong gains in household employment speak to the broad-based strength in this report.

·         The underlying tone of the report was stellar, reinforcing our expectation for a March hike.

The US economy added jobs at a brisk 292K pace in December, as the economy ended the year with a whopping 2.65M jobs being added in 2015. This was well in excess of the consensus expectation for a more modest 200K gain. Net revisions were also positive, with a further 50K jobs added to previous employment estimates, pushing the 3M and 6M average to 284K and 229K, respectively. Household employment was also quite strong, with a further 485K jobs estimated to have been added. Despite this, the unemployment rate held steady at 5.0%, as a rebound in the participation rate from 62.5% to 62.6% resulted in 466K potential workers returning to the labor force. The pace of average hourly earnings was flat on the month (down 0.04% at two decimal places), however, this weak performance is likely due to a recurring statistical quirk based on the day of the week in which the reference day falls. Admittedly, the employment situation may have been faltered higher by the weather, as the number of persons not able to work due to bad weather was down to 125K in December, which is well below the 10 year average of 177K for this time of the year.

The details of the report were quite strong. Outside of the stellar showing on topline jobs growth, aggregate hours rose at a very robust 0.3% pace, suggesting strong labor demand. Overtime work manufacturing hours also rose, climbing to 3.3 hours from 3.3 hours. On a sectoral basis, jobs were higher across the board, with strong gains in both the goods-producing (+45K) and service sector (up 230K). Beside gains in the pro-cyclical manufacturing (+8K), construction (+45K) and business services (+73K) sectors, there were also gains in hiring by government (+17K) and in the financial services (+11K). Other ancillary indicators of labor market slack point to further progress on this dimension. Despite the unchanged print in the U6 measure at 9.9%, the rise in the rate of voluntary job leavers to 10.3% from 10.0% and rise in the employment rate to 59.5% from 59.5% underscore the continued progress in the labor market. Unemployment duration also improved, as both the median and average measures of unemployment duration fell during the month.

This is an unambiguously positive report, and the broad-based improvement in a number of key dimensions suggests that the buoyancy in the US labor market is being sustained. That said, with economy activity appearing to have leaked modestly lower in recent months, we expect some of this positive momentum to be surrendered in the coming months, though the economy is expected to continue creating jobs in a manner sufficient to absorb excess labor market slack. As such, we continue to expect the Fed to remain on the tightening path, with a further 25bps increase in the target rate expected at the March FOMC meeting. 


Millan L. B. Mulraine | Deputy Chief US Macro Strategist | TD Securities USA (LLC)

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