NEW YORK (Reuters) – The U.S. economy in November added the fewest workers since the jobs recovery started six months ago, hindered by a resurgence in new COVID-19 cases that, together with a lack of more government relief money, threatens to reverse the recovery from the pandemic recession.
Nonfarm payrolls increased by 245,000 jobs after rising by 610,000 in October, the Labor Department said on Friday. The fifth straight monthly slowdown in job gains left employment well below its February peak. While the unemployment rate fell to 6.7% from 6.9%, it has been biased down by people misclassifying themselves as being “employed but absent from work.”
STOCKS: U.S. stock index futures struggled to hold slight gains. S&P 500 e-minis last up 0.26%, pointing to a steady open
BONDS: Yields on benchmark 10-year notes rose more than 3 bp 0.9592%; Two-year Treasury yields inched up to 0.1586%
FOREX: The dollar index was heavy but little changed
ULAS AKINCILAR, HEAD OF TRADING, ONLINE TRADING PLATFORM INFINOX,
“This is a counterintuitive one – the souring of the US labour market actually falls into Cinderella territory for the markets.
“Jobs growth has slowed badly, and was well below expectations. Yet any sense of disappointment was quickly trumped by the feeling that the temperature is now just right – neither too hot nor too cold – to give equities a boost.
“The calculation is that the slowing jobs market will spur US lawmakers into agreeing a fiscal stimulus to match the Fed’s monetary support. And yet the slowdown is not so bad as to send investors running for the hills.”
“The slowdown in the pace of hiring reflects the fact that the economy continues to be hampered by Covid-19. While many sectors continued to add jobs in November and unemployment continued to decline, the retail sector shed 35 thousand jobs. The decline in federal government employment reflected the loss of 93 thousand temporary workers who had been hired for the 2020 census, somewhat distorting the numbers. Despite the slowdown in the pace of employment growth, the key takeaway should be that the economy continues to recover and that, while the next few months may prove challenging for the economy, once the vaccines are rolled out employment should recover further. With payrolls still 9.8 million lower than in February, there remains plenty of room for recovery in the labour market once the vaccines allow economic activity to really start to rebound. As the vaccines drive a continued recovery in the labour market over the coming years, we would expect it to drive consumer spending, corporate profits and equities higher.”
GUY LEBAS, CHIEF FIXED INCOME STRATEGIST, JANNEY MONTGOMERY SCOTT, PHILADELPHIA
“The payrolls report was slightly weak, but within the range of forecasts, and given the degree of variability, not far off from consensus projections. That said, November’s report is the weakest monthly jobs number of the pandemic rebound, and markets are clearly betting that today’s result will pull forward stimulus talks, necessitating greater supply. I expect this curve steepening we’re seeing will continue into the auctions this month, if not longer.”
RYAN DETRICK, SENIOR MARKET STRATEGIST, LPL FINANCIAL, CHARLOTTE, NORTH CAROLINA
“Now that you have the catalyst of a potentially weakening employment backdrop with today’s big miss, it does increase the odds of getting that stimulus deal done sometime fairly soon.”
“After the enormous rally that we saw in November across the board, it makes sense that maybe November potentially steals a little from Santa Claus in December and stocks consolidate or pull back potentially a little bit. But now everyone is clearly focused on the stimulus bill, which would be the next major driver, and we are almost back to bad news is good news.”
“Today, the bad news of the weakening jobs picture is potentially good news for investors because it means that the stimulus bill is much more likely to take place in a fairly short time frame.”
MARVIN LOH, SENIOR GLOBAL MACRO STRATEGIST, STATE STREET GLOBAL MARKETS, BOSTON
“I don’t think the market’s going to react a whole lot. This thematic all risk-off because of the vaccines, the restart of talks about stimulus and the new administration, and a less confrontational international background, are still going to be the themes that drive the market.
“The jobs number to me is an indication that the virus is still affecting the real economy. The jobs numbers show that there’s still a struggle that’s occurring within the real economy. The change in jobs at 245,00 was much less than expectations.
JAMES MCDONALD, CEO AND CHIEF INVESTMENT OFFICER, HERCULES INVESTMENT, LOS ANGELES
“Friday’s report confirms that the recent labor market recovery is decelerating. With escalating COVID-19 cases and enforced shutdowns here to stay through the winter, business executives see the writing on the wall and have fallen back on layoffs to cut costs. For now, the job market recovery is over until the winter wave of COVID-19 is behind us. Vaccine deployment will not happen in time to prevent layoffs both from small businesses and major multinational companies.” “Whether or not we see a double-dip recession in the U.S. depends on the interplay between the severity of the shutdowns and their impact on the economy over the winter and the size of potential stimulus from Congress and the Federal Reserve.”
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK (email)
“This is certainly below consensus. It’s a mediocre report, and for this time of the year it’s not as strong it should have been.”
“With unemployment rate at 6.7% it indicates that the while the economy is not going off a cliff, it’s certainly slowing down.”
“I expected the surge in the pandemic to have had a bigger impact due to some of the states, if not shutting down, certainly not rehiring. I’m happy that the number wasn’t as low as I expected it to be.”
MICHAEL ENGLUND, CHIEF ECONOMIST, ACTION ECONOMICS, BOULDER, COLORADO
“The broader picture is the economy’s continuing to grow through the second month of the fourth quarter so we should get a solid GDP gain. But the question is how much does it slow as you go into December and January, which may subtract from growth in the first quarter.”
“These numbers are quite strong even if they fell short of our payroll assumptions. We’re still trending powerfully upward in November, but the risk is that this moderating trend continues in December and January.”