The US unemployment rate experienced a sharp drop to 8.6% (from 9.0%), a 2.5 year low; the broader underutilization rate continued its downward trend, decreasing to 15.6% (from 16.2%).
• A net +120k jobs were created in November, in line with consensus estimates; as another dose of good news: September and October payrolls were collectively revised upwards by 62k jobs.
• The total number of unemployed workers declined to 13.3M (from 13.9M); long-term unemployed, those who have been out of work for 6+ months, remained flat at 5.7M (43.0% of all unemployed).
• Average hourly earnings decreased 0.1% to $23.18 (+1.8% on an annual basis…far below the US’ current inflation rate: 3.5%); the average workweek decreased to 33.6 hours.
Service with a smile
• Service-related sectors experienced significant gains: professional and business services (+33k), leisure & hospitality (+22k) and health care (+17k) continued to trend upwards.
• The retail sector increased (+50k) with the most gains coming within clothing (+27k) and electronics/appliances (+5k) stores.
• Manufacturing (+2k) and construction (-12k) remained relatively unchanged.
• The public sector shed an additional 20k jobs with widespread losses at the federal/state/local levels; the Postal Service also continued to downsize (-5k).
What’s in store? Key watch items…
To say that the past couple weeks for global financial markets have been a roller coaster would be an understatement. Here’s the (long-term) good and the bad:
On the bearish side:
• Central bank actions…what’s the end game? While central banks’ coordinated efforts eased strains in European financial markets, we must remain wary of the long-term effects of their intervention on commodities priced in the US Dollar and the global economy. Energy and metal (gold/silver/copper) prices have been trending upward; rises in oil prices will continue to be a barrier to economic growth.
• Euro…glad to know ya? The breakup of the Euro Zone currency union could prove catastrophic, driving investors “flight to safety” away from weaker economies (the PIGS countries) and causing other collateral damage (e.g., asset write downs, civil unrest, etc.).
On the bullish side:
• A walk is as good as a hit. According to the Fed’s recent Beige Book report, 12 of 13 bank regions reported slow to moderate growth with modest increases in consumer spending, stronger tourism activity, steadily expanding manufacturing and stable salaries. While this by no means a home run for the US economy, any improvements in growth are welcome at this point.
• China opening the flood gates. China’s move to cut its banks reserve requirements, the first in almost three years, could provide a valuable catalyst to their suddenly sagging trade and real-estate sectors and the Chinese consumer. Analysts estimate the 0.5% rate cut to 21% will free up ~$61B for Chinese banks to lend/invest in their economy.
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