BAC

Bank of America Corporation

29.0800
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29.0800
USD
-5.06%
26.2100 35.7200
52 weeks
52 weeks

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What to expect in the November jobs report

The U.S. labor market likely chugged steadily along in November, reflecting solid job gains and an unemployment rate close to a 50-year low, according to most economists.

The Department of Labor is set to deliver its November jobs report at 8:30 a.m. ET Friday. Here are the main metrics expected from the report, according to consensus data compiled by Bloomberg as of Thursday afternoon:

  • Change in non-farm payrolls: +184,000, vs. +128,000 in October

  • Unemployment rate: 3.6%, vs. 3.6% in October

  • Average hourly earnings month over month: +0.3%, vs. +0.2% in October

  • Average hourly earnings year over year: +3.0%, vs. +3.0% in October

At these expected levels, the unemployment rate would be just a hair above the 50-year low of 3.5% logged in September. Average hourly earnings will have picked from last month’s softer-than-expected reading to the quickest month-on-month increase since August.

Headline employment gains are set to get a boost from the return of striking General Motors (GM) workers, after a 40-day United Auto Workers strike through September and October contributed to a net decline of 36,000 manufacturing payrolls in the last jobs report.

Consensus economists expect that manufacturing jobs rose by 40,000 in November.

“According to the October employment report, around 42,000 workers in the motor vehicles & parts component were lost as a result of the strike. With a resolution in hand, those impacted workers will return and be counted in the establishment survey,” Wells Fargo economist Sam Bullard wrote in a note Wednesday. “Also benefitting November, there were 5 weeks between the monthly BLS surveys, which historically has produced a firmer hiring performance, all else equal.”

But even outside of this one-time impact, consensus economists still hold high expectations for the November jobs report as other economic indicators of U.S. employment held firm during the month.

IHS Markit’s print on manufacturing sector activity last week registered the fastest rise in employment since March, and the firm’s service sector report showed the first rise in service sector employment in three months.

The Institute for Supply Management’s non-manufacturing employment index increased in November to the highest level since July, although the manufacturing employment index decreased slightly. Initial jobless claims remained relatively low throughout November and unexpectedly fell to the lowest level in seven months during the final week of the month (though the BLS survey period takes place during the week of the 12th of the month).

However, ADP/Moody’s latest jobs report released Wednesday suggested that employment trends had weakened in November. This report showed private sector job gains of just 67,000 for the month, well below the 135,000 gains expected.

That said, the ADP report has served as an imperfect indicator of employment gains in the Labor Department report, due to differences in survey methodology. Over the past two years, the median absolute difference between the initially reported ADP and BLS private payroll estimates have been about 40,000, according to a Deutsche Bank analysis. Consensus economists expect the Labor Department will report that private payrolls increased by 179,000 in November.

The Department of Labor’s jobs report Friday is also one of the last pieces of new economic data Federal Reserve members will receive before heading into their final interest rate-setting meeting of the year next week. A November jobs report in-line with or better than expected would likely serve as affirmation for the central bank to keep rates on hold for the time being, after three reductions earlier this year.

“In the Fed’s view, as long as consumer demand and the labor market remain strong enough to keep growth from deteriorating significantly below potential, they will remain in wait-and-see mode,” Deutsche Bank economist Brett Ryan said in a note last Friday.

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