the November 2014 Employment Situation

the Employment Situation

The Bureau of Labor Statistics of the Labor Department released its monthly Employment Situation report at 8:30 this morning.  I had intended to igrnore the report and continue laying out my Strategy for stocks next year.  But the news is surprisingly good–despite the apparent indifference in futures markets as I’m writing this.

lots of new jobs

The economy added 321.000 new jobs in November, all but 7,000 of them in the private sector.  That’s way above the average jobs gain over the past year, as well as miles ahead of economists’ forecasts (which may say as much about the forecasts as about the economic reality).  In addition, revisions to the two prior months reported were also positive, totalling an extra 44,000 positions.  Final job gains for September stand at +271,000; the current October estimate is +243,000.

To put the figures in perspective, the economy needs to create 125,000 – 150,000 new jobs each month to absorb first-time job seekers leaving school.  Anything over that eats into long-term unemployment.  Over the past three months, then, close to half a million people have shifted from being unemployed to having work.


The unemployment rate remained at 5.8% despite the large job gains.  This is mostly, I think, because the workforce expanded by about a half million as better job prospects caused people who had given up the search for work starting to look again. That’s what usually happens.  At least some part, however, is due to the fact that job gains/losses and the unemployment rate are determined using two different surveys–and two different sets of data.


The latest JOLTS (Job Openings and Labor Turnover Survey) report, about a month ago, from the BLS offers similar encouragement.  There are now 4.7 million unfilled jobs in the economy.   More important, the quits rate–that is, the number of people voluntarily leaving their jobs, presumably for better employment elsewhere–is rising.  This is a sign that present jobholders have increasing confidence in their skills and employability.

economic ointment fly:  wage growth

The only fly in the employment ointment is that wages are still only rising at a 2% annual rate, or basically no growth in real (inflation-adjusted) terms.

From a stock market perspective, it’s hard to know if this is good or bad.  Higher wages would presumably mean more consumer spending and therefore accelerating earnings growth for publicly traded companies.  That’s a plus.  On the other hand, accelerating wage growth can be an early indicator of inflation to come–and might cause the Fed to speed up the pace at which it will be raising interest rates in 2015.  That would surely make the ride for stocks bumpier, and would most likely cause prices to decline.

My bottom line:  despite Wall Street’s current indifference, this report is surprisingly good news.

Back to strategy on Monday.

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