November turned into an employment bonanza, helped in part by the return of workers from a strike at General Motors Company /zigman2/quotes/205226835/composite GM +1.12% . The economy busted out with 266,000 new jobs, the highest total for any month since January.
If you add the Labor Department’s upward revisions of a combined 41,000 jobs for September and October to this impressive November tally, new jobs growth has averaged a very healthy 205,000 the last three months and 180,000 for the year to date. Not too shabby for an economy that many analysts say is in the last stages of a growth phase.
The 266,000 includes close to 50,000 returning GM workers, so keep in mind that it’s not quite as huge as headlines make it appear. Manufacturing employment rose by 54,000 in November following a 43,000 decline in October, which was basically just those workers coming and going from GM. November jobs growth in some other closely watched sectors like construction, wholesale trade, and retail trade was either flat or just a little higher.
However, transportation and warehousing saw decent growth of 16,000 in November, while healthcare led everyone with 45,000 new positions and professional and technical services also came in strong.
If you’re punching a clock, you earned on average of seven cents more for each hour on the job in November compared to October. That puts wage growth at 3.1% year-over-year, right in the heart of the “Goldilocks” zone that gives workers a wallet boost but probably won’t be enough to have the Fed fretting about potential inflation.
Speaking of which, you never want to make too much out of any one data point—and the GM strike caused jobs growth to swell in November. However, a few more reports with this kind of growth could have people talking about whether prices see an impact. That said, the Fed has openly invited a bit more inflation because inflation remains below its 2% target. So a report like this and even a few similar ones early next year wouldn’t seem likely to send Fed members rushing back to the rate hike button.
What’s also interesting about today’s big number is that it goes against some talk on the Street about businesses possibly scaling back their hiring due to the trade war. That’s still possible, but it didn’t appear to happen in November. Maybe positive talk about a possible Phase One trade deal caused businesses to loosen the reins a bit.
This economy continues to be resilient, and consumer health could improve even more when you consider this sort of employment gain. The unemployment rate of 3.5% remains at 50-year lows. As we’ve said before, jobs help dictate spending, and consumer spending fires up the economy. That’s why some of the extremely low Q4 gross domestic product (GDP) estimates out there might start to get revised upward a bit following this report.
The market apparently liked what it saw from the Labor Department, with futures climbing sharply for the major indices in the hour before the opening bell. We’ll see if this can help the S&P 500 Index (SPX) climb back toward its all-time high up above 3150 after the retreat it executed over the last week.
Two of the better performers Thursday were Chinese retailers Alibaba Group Holding Ltd /zigman2/quotes/201948298/composite BABA +3.54% and JD.com /zigman2/quotes/205122565/composite JD +2.32% . Both had pretty amazing Black Fridays, and it might be hard to guess the best-selling product for them that day. Give up? Baby formula, of all things. Sales rose 172% from last year for that essential item, which is kind of a surprise.
The other surprise is to see that two Chinese firms, who you’d think might suffer from the tariff war, seemed to thrive once holiday season arrived. Both did well with U.S. consumers on Black Friday, and BABA shares are near their 52-week high. From a sales and stock perspective, these companies’ recent performance might counter conventional wisdom arguing that a trade war could hurt retailers of the two countries involved.
That said, Tiffany & Co /zigman2/quotes/209249105/composite TIF -0.0082% reported earnings more along the lines of what you might have expected in a tariff struggle, with sales slumping in the U.S. as it looked like Chinese tourism might have fallen. The company’s flagship store in New York often gets a lot of Chinese visitors, but not so much this year, it seems.
It’s a bit of a conundrum, though, seeing the U.S.-based company do pretty well in China. It’s not looking like high-rolling consumers there gave it the fish-eye. The same could be said for U.S. consumers shopping online at BABA and JD. Maybe the two countries’ leaders are having a battle, but the troops on the ground don’t seem to be taking up weapons, at least not judging from the recent shopping season.
Stepping back a bit, JD and BABA’s performance reinforces the idea that the consumer continues to spend, spend, spend. We’ve talked about it since early October, so it may sound like a broken record, but this consumer resilience is just amazing. Early indications are that the holiday season is off to a good start.
With the Fed meeting looming next week, it’s not too early to start thinking about outcomes. At this point, chances for a rate cut look about as likely as a snowstorm in Miami, if the futures market is any indication. The CME Group’s /zigman2/quotes/210449693/composite CME -2.15% FedWatch Tool puts 99.3% odds on no rate move next Wednesday, and 0.7% chances of a 25-basis point hike. Apparently a handful of investors think the Fed is more hawkish than the rest of the market appears to believe.
Today's robust jobs report would seem to bolster the "leaning hawkish" argument, although the middle-of-the-road wage gains don't appear to be in the inflationary range just yet. Yields rose about 5 basis points for the 10-year Treasury note in the minutes after the data, but the FedWatch hasn’t changed.