Hedge Funds Are "All In" Again
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The November jobs report overall came in with improvement, though there were mixed results. The unemployment rate unexpectedly dropped sharply. Payroll jobs in November advanced a relatively strong 120,000 after gaining a revised 100,000 in October (originally 80,000) and increased a revised 210,000 in September (previously 158,000). Analysts forecast a 131,000 boost in overall payrolls. Revisions for September and October were up net 70,000.
Once again, private payrolls gained more than overall. Private nonfarm payrolls gained 140,000, following a 117,000 increase in October and 220,000 rise in September. The November boost fell short of market expectations for a 150,000 increase.
In the private sector, goods-producing jobs slipped 6,000 after a 4,000 decrease in October and 36,000 boost in September. Construction jobs fell 12,000 in October after decreasing 15,000 the month before. Manufacturing employment edged up 2,000 after a 6,000 rise in October. Mining increased 2,000, following a 6,000 rise the prior month.
Private service-providing jobs advanced 146,000 in November, following a 121,000 gain the prior month. The November increase was led by trade & transportation (up 58,000), professional & business services (up 33,000), leisure & hospitality (up 22,000), health care (up 12,000). The temp help subcomponent of professional & business services rose 22,000 after a 16,000 gain.
The public sector continued to decline as government employment decreased 20,000, following a 17,000 drop in October.
Wage growth has been volatile recently as average hourly earnings in November slipped 0.1 percent, following an upwardly revised 0.3 percent gain the month before. Analysts predicted a 0.2 percent increase for November. On average, wage growth has been growing but at an anemic pace. Given the upward revision to October, the November dip should not been so disconcerting. Still, the uptrend is modest. The average workweek for all workers in November was unchanged at 34.3 hours, matching the market median forecast.
From the household survey, the unemployment rate unexpectedly dropped to 8.6 percent from 9.0 percent in October. The consensus forecast called for 9.0 percent. The rate decline reflected a 594,000 fall in the number of unemployed and a 278,000 increase in household employment. Basically, the unemployment rate fell largely due to a decline in the participation rate although household employment growth recently continues to exceed payroll jobs growth by a notable degree.
Overall, the latest employment report is favorable for the recovery continuing to gain traction. On the news, equity futures edged down as expectations were slightly stronger for payroll data and the unemployment rate dip was discounted.
Effective with the release of The Employment Situation for January 2012, scheduled for February 3, 2012, population controls that reflect the results of Census 2010 will be used in the monthly household survey estimation process. Historical data will not be revised to incorporate the new controls; consequently, household survey data for January 2012 will not be directly comparable with that for December 2011 or earlier periods. A table showing the effects of the new controls on the major labor force series will be included in the January 2012 release.
Today's chain-store results do not confirm the enormous strength of anecdotal reports for the Black Friday weekend. Almost as many chains are posting softer results for November than they did for October with most reporting little difference. Following their November results, chains are holding to guidance which on the whole point to steady rates of moderate year-on-year growth through the holidays.
The shortened Thanksgiving November 26 week clouds a 6,000 rise in initial jobless claims to 402,000. This ends three straight weeks under 400,000 and compares with Econoday expectations for 391,000 and against a 396,000 level in the prior week (revised from 393,000). The four-week average, which helps smooth out distortions in any one week, shows its first increase in five weeks, up a marginal 500 to 395,750 (prior week revised to 395,250).
Continuing claims in data for the November 19 week rose 35,000 to 3.740 million which is the highest level in two months. The four-week average is up 12,000 to 3.683 million. The unemployment rate for insured workers, resting at 2.9 percent in the prior five weeks, is up one tenth to 3.0 percent.
The Labor Department reports no special factors in the latest data but the shortened week for the initial claims period is likely to blunt market reaction. Demand for the safety of Treasuries is increasing very slightly immediately following the data.
Consumer confidence in the U.S. was little changed last week from levels typically reached during past recessions. The Bloomberg Consumer Comfort Index was minus 50.2 in the period ended November 27, after minus 50.1 the prior week. The gauge has been at minus 50 or worse for 10 of the past 11 weeks.
Two of the three components of the weekly comfort index deteriorated. The measure of Americans' views of the current state of the economy worsened to minus 88.5 last week from minus 87.2 in the prior period. The buying climate index fell to minus 49.4 from minus 48.8. The gauge of personal finances improved to minus 12.7, from minus 14.3.
ISM new orders are turning higher in what is very good news for the manufacturing sector. The new orders index for November is up a very strong 4.3 points to 56.7, above 50 to indicate monthly growth and well above October. This index had been stuck at slightly sub-50 levels in prior months which now are forgotten. Helped by new orders, the ISM composite index is up 1.2 points to a 52.7 level that compares with the Econoday consensus for 51.5. November's level is the best since June.
Details show acceleration for export orders and for production. Delivery times are little changed while input prices slipped for a second month. Backlog orders are going down which is a negative that will hopefully be offset by the rise in new orders. Another disappointment is employment where hiring slowed, here too a factor that will hopefully reverse. Inventory readings are stable.
The stock market is getting a lift from today's report which hints at building strength and renewed leadership in manufacturing.
It may not be a lot (coming from a low base) but it is starting to look like the construction sector is incrementally adding to overall economic growth. Construction spending in October advanced 0.8 percent after rising an unrevised 0.2 percent in September. Analysts had forecast a 0.3 percent boost for October.
The October increase was led by a 3.4 percent boost in private residential outlays, following a 0.6 percent rise in September. Private nonresidential construction spending also posted a gain, rising 1.3 percent, following a 0.1 percent dip the month before. Public outlays declined 1.8 percent after a 0.3 percent increase the prior month.
On a year-ago basis, overall construction outlays improved to down 0.4 percent in October from down 0.6 percent in September.
Construction outlays have risen three months in a row and in six of the last seven months. The level of activity is still subdued but it now appears to be growing and adding to overall economic growth. It is not an "engine" like manufacturing but it is in better shape than even less than a year ago.
NEW YORK (CNNMoney) -- The Federal Reserve, acting with five other central banks, took further steps Wednesday to make it cheaper for banks around the world to trade in U.S. dollars.
The Fed -- along with central banks of the eurozone, England, Japan, Switzerland and Canada -- announced a coordinated plan to lower prices on dollar liquidity swaps beginning on December 5, and extending these swap arrangements to February 1, 2013.
Meanwhile, the People's Bank of China also announced a plan to increase liquidity Wednesday by lowering its reserve requirement ratio for financial institutions by half a percentage point.
Thanksgiving is clouding weekly mortgage application readings with purchase applications down 0.8 percent and refinancing applications down 15.3 percent in the November 25 week. A look at four-week averages, which helps limit single-week distortions, shows the purchase index up 2.4 percent to offer another signal of momentum in the housing market. The four-week average for the refinancing index is down 4.9 percent.
Bargain home prices are helping to lift home sales as are low interest rates with 30-year conforming loans ($417,500 or less) averaging 4.21 percent for a two basis point decline from the prior week. Jumbo 30-year loans ($417,500 and more) averaged 4.55 percent for a four basis point decline. Thirty-year fixed mortgages backed by the Federal Housing Agency fell five basis points to 4.00 percent for their lowest rate since January. Pending home sales data, which will offer a look at contract signings for existing home sales, will be posted at 10:00 a.m. ET today.
Layoff announcements are little changed this month at 42,474 vs 42,759 in October and 48,711 in November last year. Government has been a heavy sector for layoffs this year as it is once again this month, at more than 18,500 with 13,500 of the cuts hitting civilians in the Air Force. Food, retail, and computer round out the month's next three hardest hit sectors. Layoffs in the financial sector have been mild the past two months but the report warns that contagion tied to the European financial crisis is putting US jobs in this sector at risk.
HighlightsI’m willing to bet this is higher than what the Jobs Report will come up with because November is one of the months in which they do a subtraction with their phony “birth/death” model.
ADP estimates private payrolls rose 206,000 in November vs a revised 130,000 rise in October.
Somewhat in line with the downward revision to third quarter GDP growth, productivity for the same period was revised down to a 2.3 percent rise, compared to the initial estimate of 3.1 percent and a 0.1 percent dip in the second quarter. Analysts had forecast a 2.6 percent increase for the revised number. The output component was revised down to a gain of 3.2 percent from the original 3.8 percent. Hours worked were nudged up to a 0.8 percent annualized increased from the original 0.6 percent.
Unit labor costs were revised to an annualized 2.5 percent decrease, compared to the first estimate of a 2.4 percent drop. The market median forecast was for a 2.3 percent decrease.
Compensation was softer than earlier estimated-down 0.2 percent versus up an annualized 0.6 percent.
Year-on-year, productivity was up 0.9 percent in the third quarter-matching the rate in the second quarter. Year-ago unit labor costs came in at up 0.4 percent in the second quarter, compared to a rise of 1.0 percent in the prior period.
Despite the mixed revisions (some favorable, some not), the latest productivity report is still favorable toward a continuation of growth in corporate profits with output up and labor costs down.
On the news, equity futures were up strongly but on favorable news out of Europe and on a better-than-expected ADP private employment report
The pace of activity in the Chicago area has picked up this month with the business barometer at 62.6, far above 50 to indicate monthly growth and well above October's 58.4 to indicate an acceleration in monthly growth. Leading indications in the report show significant monthly acceleration led by a nearly nine point surge in new orders to 70.2 together with a nearly four point gain for backlog orders to 55.1. The new orders index is showing is fastest rate of monthly growth since March with backlogs showing their fastest rate of build since April.
Other indications are mostly positive with production particularly strong at 67.3 for a nearly four point gain while deliveries slowed further in another indication of strength. The report's sample, which includes both manufacturing and non-manufacturing firms in the area, added to their workforces in the month but at a slower rate, at 56.9 vs 62.3 in October which was a six month high. Input prices continued to increase but at a slightly slower rate.
The stock market, moving to session highs, appears to be getting a slight boost from today's report which points to strength for both the ISM's manufacturing survey on Thursday and the ISM's non-manufacturing survey on Monday.
Evidence is building fast that home prices are falling into deepening contraction, the likely result of distressed sales tied to foreclosures. Case-Shiller data for September show a very heavy 0.6 percent monthly decline for the both adjusted and unadjusted 20-city indexes. These are three-month averages which indicate an especially severe decline for September alone. In a mild offset, contraction in year-on-year rates moderated slightly to minus 3.6 percent, again for both the adjusted and unadjusted 20-city indexes.
Home prices in Atlanta appear to be plunging, down a monthly adjusted 4.1 percent in September -- again, this is not a year-on-year reading. The decline follows monthly drops in Atlanta of 3.0 percent in August and 1.1 percent in July. Atlanta, together with Phoenix and Las Vegas, are posting new crisis lows though the report is confident that for the nation as a whole, the price collapse of 2007 through 2009 will not be repeated.
Falling home prices are a heavy load on home owners, preventing some from selling their homes and forcing some into financial distress. One upside, as seen in recent data on new and existing homes, is that lower prices, together with extremely low interest rates, are giving a very welcome boost to sales. At 10:00 a.m. ET this morning, the Federal Housing Financing Agency will post its home-price data.
"We can't solve problems by using the same kind of thinking we used when we created them."- Albert Einstein