Jobs Friday

From BLS: Total nonfarm payroll employment was essentially unchanged in October (+12,000), and the unemployment rate was unchanged at 4.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in health care and government. Temporary help services lost jobs. Employment declined in manufacturing due to strike activity.

Excluding the one-time events, the manufacturing data is getting softer and the residential construction sector is at risk with higher rates again, as the housing starts and permits data are at COVID-19 recession levels today. With that said, if you didn’t know the headline number was 12,000 with negative revisions, would the unemployment rate at 4.1% and 4% wage growth change your mind about the state of the labor market? In my view, the bond market is reading ahead of the soft headline print and going to the jobless claims, wage growth and unemployment rate data for now. 

Here’s the last 12-, 6- and 3-month averages for payroll jobs data:

• 12-month average: 181,000
• 6-month average:  131,000
• 3-month average: 104,000

If we divide that average by 138,600 per month, we are a bit below my 140,000 level.

To summarize, the labor market is getting softer but not breaking. The critical labor sectors that I focus on when looking at whether we are in an expansion or are going into a recession are residential construction workers and manufacturing employment. The manufacturing data has been softer for three months now, even if I take out the Boeing strike, and the residential construction workers are barely growing.

Now that housing starts and permits are at COVID-19 recession levels, higher rates put that group at risk, as I discussed on CNBC months ago. However, today, to explain the bond market action, think about 4% wage growth, 4.1% unemployment rate, falling jobless claims data and an economy growing above trend. I hope that clears up some of the confusion on why bond yields and mortgage rates aren’t going lower today.