11/28/2016
Payrolls Post Gains and Unemployment Falls, but Wages Slip

Payrolls Post Gains and Unemployment Falls, but Wages Slip

November’s employment report from the Labor Department showed some constructive developments, but it wasn’t all rosy.

Payrolls grew by 178,000 jobs, and the unemployment rate fell to 4.6%. The job growth total was just 2,000 less than the 180,000 economists had expected, but average hourly earnings slid 0.1%, their first decline since December 2014. In October wages rose 0.4%, and a 0.2% increase was predicted for November.

Year-over-year wage growth also came in below expectations at 2.5%, below the projection of 2.8%. In previous economic expansions, wage growth has usually fluctuated between 3% and 4%, according to HSBC economist Ryan Wang.

Workers Exiting the Labor Force
The low unemployment rate was somewhat surprising. November’s 4.6% is a steep drop-off from October’s 4.9%, and economists had expected it to hover just below 5%. The plunge can be attributed to workers leaving the job market.

Peter Boockvar of the Lindsey Group was astonished that almost 500,000 people left the labor force. Many of them were in the key demographic of 25- to 54-year-olds. The drop in average hourly wages might be due to the increased share of workers in the 16 to 24 age bracket, who make less per hour than their older counterparts.

Holiday Season Retail Blues?
Kathy Jones of Charles Schwab does not think the report lived up to its high expectations. Retail hiring dragged behind projections; a sign stores are not expecting a strong holiday season as more shopping is moving online.

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