Friday, December 6, 2019
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GM, ADP, wages, and Black Friday
The November jobs report is due out at 8:30 a.m. ET.
Wall Street expectations are for a strong report in what is set to be the last jobs report released in the 2010s. The economy is expected to create 184,000 new jobs with the unemployment rate set to hold at 3.6%.
Overall, this report should affirm that the economy remains in solid shape but, as we noted earlier this week, at a slower growth mode.
But inside this report we’re looking at four key areas that investors should monitor to get a fuller sense of how the labor market performed in November.
The first theme that economists expect to show up in November’s jobs report is a bounce-back from the General Motors (GM) strike. Economists at Capital Economics anticipate that Friday’s report will show an increase of 50,000 workers in the auto sector as a result of the strike’s resolution.
Related to the GM strike is whether ADP’s private payroll data from Wednesday will be shown as a harbinger or an outlier.
In November, private payroll gains totaled just 67,000. Following this report, Mark Zandi at Moody’s said the labor market is “losing its shine.”
But as Lew Alexander at Nomura said in a note to clients on Wednesday, recent survey data has indicated either improvement or a stabilization in the labor market.
The Institute for Supply Management’s November reading on service sector activity showed the employment sub-index increased 1.8 points from the prior month, indicating a faster rate of growth in service-sector employment. Meanwhile, IHS Markit’s composite read on economic activity in November showed employment stabilized after contracting for the prior two months. Chris Williamson, chief business economist for IHS Markit, said this is consistent with payroll growth of around 100,000 per month.
Wages will also be a big story in today’s report.
After accelerating to post-crisis highs early this year, the pace of wage growth has leveled off at 3%. And while this is just below the best levels of wage growth we’ve seen since the crisis, the flattening of gains has indicated that the labor market likely has more slack remaining that might be suggested by the unemployment rate.
Alexander said Wednesday that the stalling of wage gains is “consistent with our view that the acceleration in 2018 was due primarily to a surge in fiscal stimulus as opposed to tightening labor markets or a pickup in labor market turnover.”
Data from the NFIB published Thursday showed that 30% of small business owners raised compensation last month and 26% of owners plan to do so in the months ahead, the highest percentage since December 1989. But whether these plans begin showing up as a re-acceleration in wage growth remains to be seen.
Finally, we’ll keep an eye out for any impact that Black Friday and holiday shopping season preparations had on the labor market and the economy overall.
A report from Bank of America Merrill Lynch published Thursday indicated its consumers increased “early” holiday shopping spending — defined as the 21 days ending on Black Friday — by 2.2% this year, the strongest growth for this period since 2013. It’s not exactly data that suggests a soft labor market hurt consumer confidence as the holiday season got underway.
But as has been widely discussed, the short season between Black Friday and Christmas does pose a risk that hiring for seasonal help was pushed back, which Alexander said adds “some risk” to the November jobs report coming in softer than expected.
What to watch today
8:30 a.m. ET Change in nonfarm payrolls, November: +184,000, vs. +128,000 in October
8:30 a.m. ET Unemployment rate, November: 3.6%, vs. 3.6% in October
8:30 a.m. ET Average hourly earnings month over month, November: +0.3%, vs. +0.2% in October
8:30 a.m. ET Average hourly earnings year over year, November: +3.0%, vs. +3.0% in October
10 a.m. ET Wholesale inventories month-on-month, October final: 0.2% vs. 0.2% prior
10 a.m. ET U. Michigan Consumer Sentiment, December preliminary: 97.0 vs. 96.8 in November
From Yahoo Finance
Tune into The First Trade 30 minutes earlier at 8:30 a.m. ET for coverage of the November U.S. jobs report.
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