Steady, Sustainable US Economic Growth Means No Recession in Sight
The November Employment Report
- Sustainable is good, job growth is finally trending.
The Key Data: Payrolls: +155,000; 3-Month Average: 170,000; Private: +161,000; Revisions: -12,000; Hourly Wages: +0.2% Over-Year: +3.1%
What it means: Job gains in November were below expectations. The idea we could sustain hiring at or above 200,000 a month ranked up there with the idea that we could sustain 3% growth for a decade.
The November increase was a welcome though, as the 3-month average is a bit high but a lot closer to being sustainable.
Job increases were spread across much of the economy with only 1 major sector, information services, posting a decliner. Healthcare, food services, transportation and manufacturing all added workers at a solid pace. Even retail trade payrolls expanded.
On the unemployment front, the rate remained the same at 3.1%. A solid gain in the labor force offset a rise in the number employed. The rate is extremely low and that is causing wages to rise.
The increase over the year was over 3% for the 2nd month running, that should continue. With some major companies starting to implement $15.00/ hour minimum wages, other firms will have to follow if they are to retain or attract workers.
The Stock Market and the Fed
Every American wants strong economic, job and wage growth. But the implications of an extended period of above trend growth in any, begets is an economy with bubbles. And bubbles often burst.
So, while politicians, businesses leaders, pundits and talking heads who have been touting the likelihood of robust growth for as far as the eye can see may be unhappy with more moderate gains, economists are happy.
Steady, sustainable growth means we can stay out of a recession for a longer period of time. Markets can grow, profits can grow and valuations grow, plus consumer prices see little inflation.
For the Fed, the NFPs report allows them to do what they want. A rate hike on 19 December is likely, but if the Fed indicates it wants to “wait and see” what happens to the economy, they can say it.
And the Fed does not have to make any changes other than say that the growth is moderating. And, unless growth moves below trend, the unemployment rate will continue to slowly decline and wage gains will accelerate.
Even moderate growth could create wage pressures and concern the Fed. Rooting for a rate halt, is saying that rising wage are nothing to be worried about.
The Key what do the FMOC members believe is a realistic way of looking at the economy. We wait and see.
Making and Keeping America Great!
Have a terrific weekend.