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US Job Additions and Unemployment: What Do Markets Expect?

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US job additions in December

The non-farm payrolls for the US (IVV) (QQQ) were 155,000 in November, which underwhelmed economists’ consensus of 198,000. While job additions in manufacturing remained strong at 27,000, construction net adds declined to 5,000. Mining (XME), on the other hand, reported a job loss of 3,000. Healthcare (XLV) and professional services reported the highest job adds of 32,000.

October’s non-farm payrolls (or NFP) were also revised down to 237,000 from 250,000 previously, while September’s NFP were revised higher by 1,000 to 119,000.

Economists’ expectations for December

After last month’s weaker job additions, economists are expecting payrolls to come in at 180,000, which is lower than the average for the first 11 months of 2018 but still healthy.

Unemployment rate

The unemployment rate remained steady at 3.7% in November. The labor force participation rate remained at 62.9%. This unemployment rate is the lowest level in the last 49 years and was in line with economists’ expectations.

For December, economists are expecting the unemployment rate to remain steady at 3.7%, which is already the lowest since 1969. A level of 3.7% as expected by economists should be consistent with the Fed’s gradual rate hike (BND) scenario. If the rate comes in at this level, it shouldn’t have much of an impact on markets (SPY) (VTI).

Market concerns

The market shouldn’t be too concerned about unemployment data, which is already running at a multiyear low. In fact, a slight uptick in the unemployment level due to the increased labor force participation rate would be positive for the economy (IVV). The increase would imply that people who stopped actively looking for jobs are entering the job market again.

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