Here's what to expect from Friday's big jobs report
On Friday morning at 8:30 a.m. ET, the Bureau of Labor Statistics will release the November jobs report.
Via Bloomberg, here's what Wall Street is expecting:
- Nonfarm payrolls: +200,000
- Unemployment rate: 5%
- Average hourly earnings month-on-month: 0.2%
- Average hourly earnings year-on-year: 2.3%
- Average weekly hours worked: 34.5
Payrolls gains are estimated to fall month-on-month after a gain of 271,000 jobs in October. But not only are the prior month's data subject to revision, the November estimates are consistent with the further improvement that the Fed needs to see.
On Wednesday, Yellen made it clear that she would argue for a rate hike when the FOMC meets in two weeks to decide. Yellen said that the labor market, although short of being at "full employment," made her confident that inflation would reach the Fed's 2% target and that the economic recovery would continue even with higher interest rates.
And so Friday's jobs report could serve as the final confirmation the Fed needs to take the step of raising rates for the first time in over nine years at its meeting in two weeks.
"A rate hike will be virtually certain if the November jobs report shows a gain of more than 140,000 nonfarm payrolls (roughly 200,000 is expected)," wrote Horizon Investments' Greg Valliere in a client note this week.
"At this point, it appears that only a geopolitical event could preclude the Fed from moving; Fed officials would prefer to see the dollar's surge level off, but even the threat of Euro parity won't be enough to dissuade the central bankers."
Pointing to a modest gain in the jobs report are initial jobless claims, which remained at record lows during November.The weekly tally has stayed under 300,000 for 9 straight months and continuing claims are at a 15-year low.
Additionally, the lone bright spot in this week's disastrous ISM manufacturing report for November was a jump in the employment index to 51.3.
In both the manufacturing and non-manufacturing indexes, at least half of the industries reported stronger payroll growth month-on-month, noted Wells Fargo's Sam Bullard wrote on Thursday
"Collectively, both surveys continue to support moderate nonfarm payroll growth," Bullard wrote.
Friday's report may also bring us some good news about America's paychecks.
We noted Wednesday that the Fed's Beige Book, which spanned mid-October through November 20, was filled with talk about wage pressures from across its 12 districts.
Tom Porcelli, chief US economist at RBC Capital Markets, further noted that Beige-Book mentions of "shortage," "turnover," "difficulty," and other derivatives related to labor market tightening are basically at a record high.
Also on Wednesday, the Department of Labor's latest productivity and compensation figures showed that nonfarm hourly compensation adjusted for inflation rose 3.4% in the third quarter compared to the same period last year.It is too soon to say this translates to wage growth, but this is definitely a sign that the labor market is getting tighter, which means wages are getting competitive even for positions that require the fewest skills.
And considering that wage growth has been one of the most stubborn parts of the labor-market recovery, this is a welcome sign for everyone, including the Fed.
As we learned this week, Yellen thinks putting off a rate hike is riskier than moving later this month, and so Friday's jobs report likely needs to be just good enough to justify Fed action.
Or as Ian Shepherdson at Pantheon Macro wrote this week: "When the Fed chair points out that unemployment has dropped to its long-run sustainable level, wage gains have picked up, final domestic demand has accelerated and core inflation is only marginally below the target once you strip out temporary factors, well, you have to think she's trying to tell you something."