Nonfarm Payrolls Commentary

January 4, 2013


Nonfarm payrolls expanded by 155K for the month of December, falling slightly short of Janney’s FI team’s forecasts of 159K growth and slightly above the consensus 152K forecast. The unemployment rate rose 0.1% to 7.8%, versus their and consensus expectations of no change.
-Guy LeBas, chief fixed income strategist, Janney Montgomery Scott

  • December payroll growth accelerated versus the prior months’ pace to 155K, allowing the labor markets to finish off the year on at least a moderately positive note.
    • Reconciling the faster pace of job growth in December with what appears to be a lump-o-coal holiday retail season is a little challenging, however, but they’re not one to look a gift elf in the mouth. Note that, as they pointed out with November’s data, it’ll be until February that they see a “free and clear” jobs number without the impact of either Sandy or an unusually early holiday season.
  • The establishment survey pointed to expansion in several industries, most notably construction ( 30K) and manufacturing ( 25K).
    • On the first count, they attribute most of the gains to Sandy-related rebuilding, though the second count is harder to parse. With all of the talk of fiscal cliffishness and the tax risks that businesses expressed following the reelection of President Obama, it’s surprising to see the most margin-sensitive businesses adding to their payrolls—unless, as has been the contention, this idea of policy uncertainty is really a cover for business leaders to explain away weak underlying demand for their products.
  • Retail hiring (-11K) meanwhile marked something of a soft spot for December hiring, which is anathema to the traditional perception of the holiday season.
    • These numbers are, of course, seasonally adjusted, which should take out the holiday-phoria from jobs data, but for December, the unusually early timing of Thanksgiving meant that hiring was pulled forward into November. In that sense, November’s seasonally-adjusted 63K retail hiring growth and Decembers -11K net out to a moderate though largely unspectacular increase in retail payrolls.
  • When it comes to the unemployment rate, all bets are off.
    • Between a shifting structure and size of the labor force, and heavy volatility in the numerator of the employment ratio, it’s hard to track any sort of underlying trend in the data. That the Fed has tied its zero interest rate policy to what’s become an unstable indicator is fraught with irony. For December, the unemployment rate came in above expectations at 7.8%, versus an upwardly-revised Nov. number. Labor force participation remained unchanged.
  • On balance, December’s jobs numbers represent yet another good-not-great labor market report, a description which could characterize just about every piece of incoming employment data issued since midsummer.
    • In some sense, this long-lasting mediocre situation echoes broader trends in the US economy, where we’re faced with a number of risks from marginal components of economic growth (government spending, energy, exports), and a lack of “inspiration” when it comes to the core sources of output. As the page turns to 2013, there’s little hint of change for the next twelve months. Long live the zero interest rate policy!