Jobless rate drops to 7% as payrolls exceed forecasts
The November jobs report suggests the economy once again added to payrolls, producing another 203,000 for the month, better than consensus expectations for an increase of 188,000. Revisions to payrolls for the preceding two months were modest, but positive. The net effect pushed the jobless rate down to 7%, also better than the result anticipated by economists.
After a brief hiccup in October, the drop in the unemployment rate continued the generally steady downward trajectory in place since the beginning of the year. However, it’s also important to recognize that the decline hasn’t been solely driven by the creation of high-paying full-time jobs. The declining labor force participation rate and a higher percentage of new part-time jobs suggest the improvements take some of the luster off the headline rate.
The Fed continues to cite the nation’s persistently high unemployment rate as a primary catalyst for their ongoing accommodative policy stance. The recent string of better-than-expected data on growth and the jobs market raises the odds that the Fed could commence the tapering process for their bond purchase program in the near-term. The transition of the Fed to the leadership of Janet Yellen may muddy the waters a bit, but the probability for a move by the Fed at its meeting this month, versus another decision to hold off for now, remains unclear.
Recent economic news has been largely positive, suggesting that the economy looks to be accelerating heading into the end of the year. As contrary as it may seem, a meaningful, sustained improvement in the economy – if recent strength were to persist – may not be a positive near-term development for investors. The economy has been in a sweet spot of moderate growth supported by easy monetary policy. Should growth accelerate to the point that the Fed begins to take its foot off the gas, investors could view the policy shift as a catalyst for profit-taking. Nonetheless, while that transition could be bumpy, the benefits of continued growth in corporate profits and a more optimistic global outlook should still be supportive of the markets over the longer term.
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