Add ING analyst Rob Carnell to the list of folks that just refuses to believe Friday’s shocking unemployment report.
His basic contention, via FT Alphaville, is that the report was too good to be true, ergo it must not be true.
In our view, the only potential fly in the ointment of this labour report is how believable it is. Payrolls has been making very, very slow progress in recent months, and such a dramatic turnaround will raise eyebrows, and may not be taken at face value by many. An improvement in the payrolls series always looked on the cards from last month. But most of the labour market data in the run up to this release had been consistent only with a very small step forward, so we may need to see this backed up again next month before concern about the labour market can really be filed away as ‘last year’s worries’.
Further support for the turnaround in the employment sector came from hours worked – which gained 0.2 hours on the month, helping to push weekly earnings higher. Hourly earnings continued to decline and now stand at only 2.2% YoY. But they lag employment growth by up to two years, so it would be a bit early to expect much improvement here.
In contrast to the weak November non-manufacturing ISM survey’s employment index yesterday, which registered only a small increase from very low levels, the service sector apparently generated 58K jobs in November. Strong gains in temporary help jobs (usually a retail sector phenomenon) were a big factor here, so anecdotal reports of relatively soft retail sales in November may see some of these jobs rapidly removed after the end of the year, once sales have finished (if demand does not improve).
We are also slightly curious about the apparent surge in government jobs, which on revision have risen by more than 50K in the last two months. When state and local finances are in such a deep mess, even the Obama fiscal package is unlikely to have generated this rapid turnaround in the public sector. More believably, goods producing, construction and manufacturing jobs all saw continued large falls.