In what many viewed as the final piece of the puzzle before a Fed liftoff later this month, the Bureau of Labor Statistics (BLS) reported solid job gains of 211,000 for November in the Employment Summary for November 2015 released Friday.
November’s job gains combined with upward revisions of 35,000 jobs in September (137,000 to 145,000) and October (271,000 to 298,000) to lift the average monthly job gains for the last three months up to 218,000. The labor participation rate inched up from a 38-year low of 62.4 percent in October to 62.5 percent, its first monthly increase in six months.
“Today’s November jobs report continues to show an upbeat picture of the labor market,” Fannie Mae SVP and Chief Economist Doug Duncan said. “A solid job gain of 211,000 following sizable upward revisions in the prior two months boosted the average job gain over the past three months to a respectable 218,000, the best showing since July. The unemployment rate held steady amid the first rise in the labor force participation rate since May.”
Many analysts and economists predicted prior to Friday the only thing that will prevent a liftoff by the Fed at the December 17 Federal Open Market Committee meeting was a poor November jobs report. Now that employment growth came in at more than 200,000 for November and is averaging 218,000 over a three-month period from September to November, those same analysts are sticking to their forecasts.
“The November jobs report showed another strong month of job gains, along with upward revisions to prior months,” said Curt Long, Chief Economist for the National Association of Federal Credit Unions (NAFCU). “Wage growth moderated somewhat, but the labor force participation rate ticked up for the first time since May. This should put to bed any doubts about whether the Fed will announce a rate increase later this month. Barring something completely out of left field between now and then, liftoff will commence with a quarter-point rate increase to the target federal funds rate.”
Likewise, Duncan stated that “[t]oday’s report reinforces our view that underlying domestic demand appears to be solid enough for the Fed to finally depart from its zero interest rate policy this month.”
Robert Denk, Assistant VP for Forecasting and Analysis with the National Association of Home Builders (NAHB), noted, "Policy makers at the Federal Reserve weren’t looking for rocket-like gains in this report, just no disasters; the cumulative gains in the recovery are sufficient. The beginning of monetary policy normalization, liftoff, is likely at the December meeting of the Federal Open Market Committee."
Wage growth was slow in November, at least compared to October. In November, average hourly wage growth climbed by 4 cents up to $25.25 from the previous month; in October, average hourly wage growth totaled 9 cents month-over-month.
“Annual wage gains decelerated slightly but remain near the upper-end of the range observed over the past several years,” Duncan said. “The implication for housing is also encouraging, as construction payrolls posted the best back-to-back gains since January.”
The unemployment rate remained at 5.0 percent in November; however, the more comprehensive U-6 unemployment rate, which includes total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, ticked up slightly from 9.8 percent in October to 9.9 percent in November. October’s U-6 rate of 9.8 percent was the first time it was reported below 10 percent for any one month since May 2008, when it was 9.7 percent. At the peak of the recession, in late 2009 and early 2010, the U-6 rate hovered around 17 percent.
“Barring something completely out of left field between now and then, liftoff will commence with a quarter-point rate increase to the target federal funds rate.”
Curt Long, Chief Economist, NAFCU
Though the unemployment rate more commonly reported (known as the U-3 rate) is low at 5.0 percent, it often does not tell the whole story. In a public address at the Economic Club in Washington, D.C. earlier this week, Fed Chairman Janet Yellen noted that “we cannot yet, in my judgment, declare the labor market has reached full employment. . .To begin with, I believe that a significant number of individuals now classified as out of the labor force would find and accept jobs in an even stronger labor market. To be classified as unemployed, working-age people must report that they have actively sought work within the past four weeks. Most of those not seeking work are appropriately not counted as unemployed. These include most retirees, teenagers and young adults in school, and those staying home to care for children and other dependent family members. Even in a stronger job market, it is likely that many of these individuals would choose not to work.”