Strong U.S. job growth, rising wages boost December rate hike prospects
Nonfarm payrolls increased by 161,000 jobs last month amid gains in construction, healthcare and professional and business services, the Labor Department said on Friday.
Adding to the report’s strong tone, August and September data was revised to show 44,000 more jobs created than previously reported. Average hourly earnings increased 10 cents in October. As a result, the year-on-year gain in wages last month was the largest in nearly 7-1/2 years. (…)
The unemployment rate fell one-tenth of a percentage point to 4.9 percent, in part as people dropped out of the labor force. (…)
Average hourly earnings increased 0.4 percent in October after advancing 0.3 percent in September. That pushed the year-on-year increase to 2.8 percent, the biggest gain since June 2009, from 2.7 percent in September. (…)
The average workweek held steady at 34.4 hours.
Construction payrolls increased 11,000, rising for a second straight month. But manufacturing employment fell 9,000 last month, falling for a third straight month.
Retail sector employment surprising fell 1,100 jobs, despite anecdotal evidence retailers had embarked on early hiring for the holiday season.
Professional and business services payrolls rose 43,000.
Healthcare and social assistance employment increased 39,100 last month. Temporary-help jobs, a harbinger for future hiring, increased 6,400. Government employment rose by 19,000 jobs.
(…) Recall that in September, the Household Survey revealed that the number of part-time workers soared by 430,000 as full-time workers actually declined by 5,000. The trend continued in October, when another 103,000 full-time jobs were lost, which was offset by a 90,000 increase in part-time jobs. In other words, the transition to a part-time worker society appears to have resumed after a hiatus. (…)
The same series on a historical basis, shows that full-time jobs have been giving way to part-time jobs in recent months as Obamacare starts to bite, and as retail hiring picks up a the expense of all else.
Same thing up North:
From September to October, part-time employment jumped by 67,000 spots and full-time fell by 23,000, according to Statistics Canada’s monthly labour report. Analysts polled by Bloomberg had forecast a loss of 15,000 positions.
Part-time work has underpinned the country’s job creation over the past 12 months. Of the 140,000 new positions, 124,000 are part time. (…)
(…) The reports incorporate millions of salaries collected on Glassdoor from U.S. workers and apply a proprietary machine learning algorithm to estimate trends in local pay. (…)
The October 2016 Local Pay Reports reveal median base pay rose 2.8 percent overall for the U.S to $51,404. Currently available in five metros, the Local Pay Reports show the fastest median salary growth was in San Francisco at 4.2 percent to $65,927 — well above the U.S. average of 2.8 percent. San Francisco is followed by healthy wage growth in Los Angeles (3.9 percent growth to $58,827 median base pay), New York City (3.9 percent, $60,365), Chicago (2.8 percent, $55,864). Houston’s wages are growing slowly, below the U.S. average at 1.6 percent to $54,462.
Overall, booming tech and professional services employment in the San Francisco Bay Area largely explains that metro’s rapid pay growth. Similar booms in tech and professional services are fueling pay growth in New York City and Los Angeles, as well as strong growth in some blue-collar fields. By contrast, the Houston metro has been adversely affected by falling oil prices this year, causing below-average wage growth.
Note: 3-month moving average trend in median base pay at the overall U.S. level. Source: Glassdoor Economic Research (glassdoor.com/research)
Productivity Jumped in Third Quarter U.S. worker productivity advanced at the best rate in two years during the third quarter, but the broader trend remains consistent with a decade-long decline.
Nonfarm business productivity, measured as the goods and services produced by American workers per hour, increased at a 3.1% seasonally adjusted annual rate in the third quarter, the Labor Department said Thursday. The change reflected a strong increase in output while hours worked increased only slightly. (…)
Compared with a year earlier, productivity was flat in the third quarter. (…)
Unit labor costs at nonfarm businesses rose at a 0.3% annual rate in the third quarter. Economists surveyed by the Journal had expected growth at a 1.2% pace. The small increase was a slowdown from the second quarter’s revised 3.9% advance. Rising unit labor costs can erode profits and put pressure on firms to raise prices.
Thursday’s report showed inflation-adjusted hourly compensation advanced at a 1.7% pace last quarter, a modest acceleration from the second quarter. (…) (Charts from Haver Analytics)
U.S. Factory Orders and Shipments Trend Higher
Manufacturing sector orders improved 0.3% during September following a 0.4% increase in August, revised from 0.2%. Three month growth rose to 8.4%. New orders for durable goods declined 0.3% (+1.4% y/y), which was revised from the advance report of a 0.1% easing. (…) Shipments of durable goods gained 0.8% (-1.1% y/y), led by a 2.2% recovery in transportation equipment shipments (-1.3% y/y).
Unfilled orders fell 0.4% (-1.6% y/y), the fourth consecutive monthly decline. It reflected a 0.6% drop (-2.6% y/y) in transportation sector backlogs. (…)
Inventories of manufactured products were little changed (-1.9% y/y) after a 0.1% rise. (…)
Getting away from the monthly seasonal adjustments and looking at the data on a year-over-year (YoY) basis suggests that the manufacturing sector remains in poor shape relative to last year. (The Daily Shot)
Trucking companies are braking hard on their fleet plans. Orders for heavy-duty commercial trucks in North America plummeted 46% in October from the same month last year, the WSJ’s Bob Tita and Loretta Chao report, providing a grim outlook for truck manufacturers in the coming year. The latest order reports from ACT Research and FTR were largely like the weak September snapshot of the market, but the new figures carry outsize weight because they signal plans for fleet upgrades and expansion for the coming year. That suggests a tough 2017 for truck makers unless carriers see a sharp turnaround in industrial shipping demand—an unlikely prospect for the coming winter months. Still, analysts at FTR point to recent stability in domestic freight markets and say orders may pick up once uncertainty surrounding the elections recedes. (WSJ)
OIL
Following Wednesday’s sharp rise in U.S. oil inventories, I suggested there might be a demand problem. The Daily Shot has this chart this morning:
Gasoline demand is now below last year’s levels.
We have seen this movie many times before:
Saudis threaten to raise oil output again as sparring with Iran returns Old disputes between Saudi Arabia and rival Iran resurfaced at a meeting of OPEC experts last week, with Riyadh threatening to raise oil output steeply to bring prices down if Tehran refuses to limit its supply, OPEC sources say.
Old disputes between Saudi Arabia and rival Iran resurfaced at a meeting of OPEC experts last week, with Riyadh threatening to raise oil output steeply to bring prices down if Tehran refuses to limit its supply, OPEC sources say. (…)
“The Saudis have threatened to raise their production to 11 million barrels per day and even 12 million bpd, bringing oil prices down, and to withdraw from the meeting,” one OPEC source who attended the meeting told Reuters. (…)
The Saudi threat followed objections by Iran, which said it was unwilling to freeze its output, the same OPEC sources said. (…)
The Saudi OPEC delegation told their Iranian counterparts that Tehran should freeze output at 3.66 million bpd – the latest estimates of Iranian output by OPEC experts, known as secondary sources.
Iran has reported its output at 3.85 million bpd in September and said it would only cap its output at 12.7 percent of OPEC’s total ceiling – or 4.2 million bpd.
Iran’s counter-argument at the meeting was that Saudi Arabia has raised its output by almost 1 million bpd since 2014, and is now trying to convince others it would cut output by 400,000 bpd to get a deal, though in reality Riyadh has already won extra production and revenue, according to OPEC sources. (…)
“Working in oil industry is like operating at war fronts and we have to preserve our trenches by raising our production capacity as much as we can,” Ali Kardor, managing director of the National Iranian Oil Company (NIOC), told the oil ministry’s news agency Shana.
“The next OPEC meeting is near and we will never cease to recapture our quota in the organization,” he said on Monday, adding that Iran’s crude oil output was nearing 4 million bpd.
OPEC sources have said Saudi Arabia offered to reduce its output from summer peaks of 10.7 million bpd to about 10.2 million if Iran agreed to freeze production at around levels of 3.6 million-3.7 million bpd. (…)
The High Level Committee of experts will meet again in Vienna on Nov. 25 to finalize the details ahead of the next meeting of OPEC ministers on Nov. 30.
OPEC Secretary-General Mohammed Barkindo has said he is “optimistic” a final agreement will be reached.
An OPEC delegate, who attended Friday’s meeting, said he still hoped for a deal in November.
“People can look at it from different angles. The fact that discussions are still going on is a positive one. They are going to work on it, close to the ministers’ meeting,” the delegate said.
Average ACA premium increases.
Source: @NickatFP via The Daily Shot
EARNINGS WATCH
- 410 companies (86.4% of the S&P 500’s market cap) have reported. Earnings are beating by 6.1% while revenues are surprising by 0.2%.
- Expectations are for revenue, earnings, and EPS growth of 2.5%, 2.1%, and 4.2%, respectively.
- EPS is on pace for +5.0%, assuming the current beat rate for the remainder of the season. This would be +8.5% excluding Energy.
Thomson Reuters’ tally now sees Q3 EPS up 3.9% (+3.3% yesterday) but Q4 estimates keep edging lower: +6.7% vs +6.8% yesterday.