November Jobs report disappointing, but optimism reigns

Despite optimism on the part of many economists, bankers and media, the U.S. economy was below expectations in the November Job Report, released by the Labor Department on Friday, when it showed that non-farm payrolls were down by 155,000, rather than the expected 198,000.

Many are seeing this as a paradigm, if not a disaster, and most are optimistic, and cite the banner headline of unemployment of 3.79 to cover any perceived cracks in the paint of a report that was hoped to be joyful.

“Adding 155,000 jobs this month is not a disappointment,” said Martha Gimbel, director of economic research at Indeed Hiring Lab. She said the U.S. is still adding “twice the jobs that the economy needs to add each month to keep the unemployment rate steady,” in her remarks to Marketwatch.

Taking the opposite tack from our early assessment, is this: “None of the information released today represents a paradigm change for the economy—the labor market is strong and continues to get stronger,” said “senior U.S. economist Eric Winograd of AllianceBernstein, and he stressed: “This, more than anything else, is the reason that the [Fed] remains likely to raise rates over the course of the next year.”

Wages, still are low, at a gain of only 0.2 for the average, and not the 0.3 that was hoped for; consumer confidence has waned, despite some expenditures that seem to reflect more need, than desire.

In previous months we have examined the myriad of reasons why wages will only increase, including those employers who will only reward those who are accepting new jobs, or those who bring much needed skills to a job; and, many employers are still finding it difficult to attract those jobseekers with the skill that they need.

“Employees who say they are willing to go above and beyond at work has declined,” said Brian Kropp, vice president for human resources at Gartner. One out of four employees used to say they were giving their work an extra oomph — something Gartner calls “discretionary effort.” Now, it’s closer to one in six.

The reason, Mr. Kropp said, is simple: Workers are not being rewarded for their efforts. “One of the things we’ve seen is that it’s harder for employees to get promoted nowadays,” he said. In 2006, for example, it took an average of about two and a half years to get a promotion, compared with four and a half years today,” reported The New York Times.

Labor Force Participation remains the same as in prior months at 62.9 percent, or 133,000, reflecting in part, the growing rise of baby boomers that are retiring; but, as we have cited there are those that do not have a specific reason, yet to most observers, the lack of real wages is a significant factor.

Last month we showed that gender played a role and that more women were entering the workforce at record rates, and that many men are still staying on the sidelines. And, some have said that men want the higher pay, while women,even with the gender gap in pay; and, many are entering, even if only to support the men, who are holding out, but that is more conjecture than fact.

The market has shown strength, as previously reported for low wage earners and those with less education, and has expanded opportunities for African Americans, Latinx, and those with lesser skills.

There are winners in the report, despite the need, or more accurately, the seasonal holiday help, retail jobs increased to over 18,000; manufacturing rose by 27,000; and transportation and warehousing rose to 25,000 jobs, in no small part to the rise of online retail and the need for big box warehouses, plus workers needed to pick and pack the merchandise, as much as haul it long distance.

Bad news is still the case for those marooned in part-time jobs that would like full-time’ indeed full time jobs are still the ones most sought, especially in nursing and retail, and in fact, that rate rose in November from 7.6 percent, from a previous 7.4 in what economists call the real unemployment rate.

For most, the attention is now on the Federal Reserve and whether they will continue to raise interest rates, to prevent the economy from overheating, which is part of their mandate.

“Meanwhile, the recent drop in oil prices has made any near-term acceleration in inflation less likely. A measure of core inflation that excludes food and energy prices, at 1.8% in October, was below where the Fed projects it will be on average in the fourth quarter,” noted National Public Radio.

An added factor, they noted is that “Fiscal policy is another uncertainty. A key source of growth in the near-term, it is set to lose some impetus when a two-year package of federal spending increases expires next September. It is unclear whether lawmakers and the White House will come up with a new agreement for additional spending going into an election year or allow fiscal restraint to take hold.”

With the public drumming that President Trump has given Chair Jerome Powell, many are wondering if he will stay the course, or succumb to pressure, with the by-now standard belittling of administration officials, from the president.

He has said that a “pause “might be needed in the planned progress of rate hikes, but overall, the Fed has said that that there has been no broad shift in interest polcv, ”even if incoming data prompts them to drag out the pace of increases in the months ahead.”

"That's not a lottery jackpot, but it also doesn't set off inflation alarm bells for financial markets or central bankers," Mark Hamrick, Bankrate.com senior economic analyst, said of the wage growth number”, in his cautious remarks with NPR.

Powell has replied that he will not act in accordance with public shaming, but will instead continue the data driven path of his predecessor, Janet Yellen.

What has come out is a push for a neutral rate in 2019, after the mid-December rate increase; a move that has been promoted by Randy Quales, the Reserve’s vice president for bank supervision, between, 2.5 percent and 3.5 percent.

Taking a  look back under the leadership of Alan Greenspan, as chair, the Wall Street Journal cited, “Mr. Greenspan experimented with interest-rate guidance in 2003, when inflation was low and the job market soft. The Fed offered an assurance to investors that short-term rates—then 1%—would remain low for a “considerable period.

The Fed raised rates in quarter percentage point increments at 17 straight meetings between June 2004 and June 2006, and along the way assured investors it would proceed at a “measured” pace. In December 2005, as officials started considering stopping the rate increases, they modified their statement to say “some further measured policy firming” could be needed.”

But there was, later on, a widely held belief that the Fed’s “measured pace” guidance was a mistake because it locked them in to predictable rate changes and betrayed their own uncertainty about the outlook,” the Journal noted.

Taking an honest, and cautious, path was Federal Reserve Bank of New York President John Williams,” who spoke later on Thursday, after Powell expressed confidence in the economy, saying “the biggest challenge facing policy makers is achieving a soft economic landing.

“We have a pretty strong economy -- unemployment pretty low, inflation near our goal -- it’s just managing a soft landing, keeping this expansion going for the next few years,” he said in remarks with former Bank of England Governor Mervyn King at the LSE Foundation in New York.

“In practice we know things happen, unforeseen events can occur. We just need to be really prepared and be nimble about how we respond to changing circumstances,” he said to Bloomberg.com.

While not quite a major issue, yet, tariffs, and the ongoing tension with China, are giving some concerns, at least to the market and investors; yet despite that, and with a moderate global economy, at least pending the U.K.’s Brexit from the European Union, but with the good news from Spain, and their economic recovery, plus a strong U.S. dollar, restraint my indeed rule the day.