Jobs Friday: NFP Increased By 228K In November, Wage Growth Cools To 2.5% YoY, Unemployment Near 17 Year Lows

Total nonfarm payroll employment increased by 228,000 in November, and the unemployment  rate was unchanged at 4.1 percent, the U.S. Bureau of Labor Statistics reported today.

Employment continued to trend up in professional and business services, manufacturing,  and health care.

Household Survey Data

The unemployment rate held at 4.1 percent in November, and the number of unemployed persons was essentially unchanged at 6.6 million. Over the year, the unemployment rate and the number of unemployed persons were down by 0.5 percentage point and 799,000, respectively. (See table A-1.)

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Among the major worker groups, the unemployment rate for teenagers increased to 15.9 percent in November. The jobless rates for adult men (3.7 percent), adult women (3.7 percent), Whites (3.6 percent), Blacks (7.3 percent), Asians (3.0 percent), and Hispanics (4.7 percent) showed little change. (See tables A-1, A-2, and A-3.)

The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 1.6 million in November and accounted for 23.8 percent of the unemployed.  Over the year, the number of long-term unemployed was down by 275,000. (See table A-12.)

The labor force participation rate remained at 62.7 percent in November and has shown no  clear trend over the past 12 months. The employment-population ratio, at 60.1 percent,  changed little in November and has shown little movement, on net, since early this year. (See table A-1.)

The number of persons employed part time for economic reasons (sometimes referred to as  involuntary part-time workers), at 4.8 million, was essentially unchanged in November but was down by 858,000 over the year. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find full-time jobs. (See table A-8.)

In November, 1.5 million persons were marginally attached to the labor force, down by
451,000 from a year earlier. (The data are not seasonally adjusted.) These individuals
were not in the labor force, wanted and were available for work, and had looked for a job  sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. (See table A-16.)

Among the marginally attached, there were 469,000 discouraged workers in November, down by 122,000 from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.0 million persons marginally attached to the labor force in November  had not searched for work for reasons such as school attendance or family responsibilities. (See table A-16.)

Establishment Survey Data

Total nonfarm payroll employment increased by 228,000 in November. Employment continued to trend up in professional and business services, manufacturing, and health care. Employment growth has averaged 174,000 per month thus far this year, compared with an average monthly gain of 187,000 in 2016. (See table B-1.)

Employment in professional and business services continued on an upward trend in November (+46,000). Over the past 12 months, the industry has added 548,000 jobs.

In November, manufacturing added 31,000 jobs. Within the industry, employment rose in machinery (+8,000), fabricated metal products (+7,000), computer and electronic products  (+4,000), and plastics and rubber products (+4,000). Since a recent low in November 2016,  manufacturing employment has increased by 189,000.

Health care added 30,000 jobs in November. Most of the gain occurred in ambulatory health care services (+25,000), which includes offices of physicians and outpatient care centers.  Monthly employment growth in health care has averaged 24,000 thus far in 2017, compared with an average increase of 32,000 per month in 2016.

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Within construction, employment among specialty trade contractors increased by 23,000 in  November and by 132,000 over the year.

Employment in other major industries, including mining, wholesale trade, retail trade,
transportation and warehousing, information, financial activities, leisure and hospitality,
and government, changed little over the month.

The average workweek for all employees on private nonfarm payrolls increased by 0.1 hour to 34.5 hours in November. In manufacturing, the workweek was unchanged at 40.9 hours, and overtime remained at 3.5 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.7 hours. (See tables B-2 and B-7.)

In November, average hourly earnings for all employees on private nonfarm payrolls rose  by 5 cents to $26.55. Over the year, average hourly earnings have risen by 64 cents, or 2.5 percent. Average hourly earnings of private-sector production and nonsupervisory
employees rose by 5 cents to $22.24 in November. (See tables B-3 and B-8.)

The change in total nonfarm payroll employment for September was revised up from +18,000 to +38,000, and the change for October was revised down from +261,000 to +244,000. With these revisions, employment gains in September and October combined were 3,000 more than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.)  After revisions, job gains have averaged 170,000 over the last 3 months.

Wage growth cooled to 2.5% YoY in November. Despite all the monetary stimulus, wage growth never exceeded 3% since The Great Recession ended in June 2009.

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Nothing in this jobs report will change the likely out come of the next FOMC meeting on December 13th. There is a 98.3% implied probability of a rate hike.

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Trumpcoin? Bitcoin Reaches $15,600 Mark (Up From $710 On 2016 Election Day of Trump)

Crypto-currency  Bitcoin has experienced a tremendous run-up since the 2016 election (November 8th) of Donald Trump. In fact, it has risen from $710 on election day 2016 to $15,600 as of today.

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The US Treasury 10 year yield rose dramatically on election day 2016, but today’s 10-year yield is about the same as it was in late November 2016.

The US Treasury 10Y-2Y curve continues to flatten as Trump enthusiasm waines as Democrats ferociously attempt to block almost any change proposed by Trump or Republicans.

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Oddly, Bitcoin was left off the list off the Financial Systems Vulnerabilities Monitor.

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Robot Monster! Transportation Stocks, Bitcoin Zoom, Tech Stocks Stutter and Hindenburg Omen Keeps Flashing

Another day in the land of Central Bank bubbles.

According to Bloomberg, transportation stocks have rallied more than 8 percent in a week, realigning them with industrials at new highs in a coupling that is one of the market’s oldest bullish technical indicators. According to the century-old Dow Theory, simultaneous records in the groups trigger a buy signal for U.S. stocks. Optimism that changes in U.S. tax policy will benefit the industry reignited the Dow Jones Transportation Average on Monday, pushing it back to an all-time high along with the industrials gauge.

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But at the same time, the Hindenburg Omen keeps … omening?

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The tech stock index SOX is stuttering.

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And crypto-currency Bitcoin keeps bubbling.

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Yes, another day in the land of Central Bank-generated asset bubbles.

“There is no escape from us, fool humans. There is no escape!”

Janet Yellen and The FOMC creating asset bubbles. Here is a video of her last speech to Congress.

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Heartache Tonight! Bank C&I Lending Falls To 1.2% YoY (Auto Loans Fall To 2.1% YoY, Real Estate Loans Fall To 5.1% YoY)

We’ve got a heartache tonight … in terms of bank lending. Particularly commercial and industrial lending (C&I) and auto loans. Particularly since bank lending is the primary transmission vehicle for Federal Reserve policies.

C&I lending growth fell to 1.2% YoY, which has historically meant that a recession is close at hand.

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Auto loans also fell to 2.1% YoY.

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The good news? Real estate lending fell too, but to 5.1% YoY.

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Have the stimulative effects of The Fed’s ZIRP and QE policies run out?

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Yes, its a heartche tonight for bank lending and Fed monetary policies.

Fed Chair Janet Yellen Testifies At Senate Hearing On Semiannual Monetary Policy Report To Congress

The Venture Capital Bubble Is Imploding! (The Beginning Of The Great Bubble Deflation?)

Following The Great Recession and The Fed’s extraordinary response, there was a lot of money available that we seeking risky assets, such as equities, housing and apartments.

Venture capital, the darling of business schools (that rarely look at the data, but focus on the snake oil-aspect of VC), has been in decline since 2014 after a meteoric rise after 2007.

 

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Most of the decline has been in early stage Venture Capital.

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As The Fed begins it perilous journey to return to normalized interest rates, the VC bubble will disappear.

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Will other risky assets bubbles begin exploding as well?

Bitcoin Bursts To 11,500 Then Back To 9,500 As Consumer Purchasing Power Continues To Weaken

Are crypo-currencies like Bitcoin the new gold … or potential de-facto US currency? OR is Bitcoin and related crypto-currencies (e.g., Ethereum) in an appalling bubble? That is, few actual investors driving the price over 11,000. Time will tell.

But what we do know is that Bitcoin has just breached the $11,000 barrier while consumer purchasing power of the US Dollar keeps declining.

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Ethereum is showing a similar meteoric rise.

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UPDATE: Like any bubble,  Bitcoin and Ethereum Classic have lost a little air after 9am highs.

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Of course, the creation of The Federal Reserve System in 1913 under President Woodrow Wilson helped to constantly devalue the US Dollar ever since.

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With the Franklin Roosevelt’s Executive Order of 1933 preventing the hoarding of gold (and the subsequent Richard Nixon unilateral cancellation of the direct international convertibility of the United States dollar to gold) …

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we haven’t had to listen to fiery speeches like William Jennings Bryan on July 9, 1896, at the Democratic National Convention in Chicago. The issue was whether to endorse the free coinage of silver at a ratio of silver to gold of 16 to 1.

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The way it was in the United States.

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Hey, now we have FIAT currency (not backed by any precious commodity like gold or silver).

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For Fannie-Freddie Regulator (FHFA), Battle Heats Up With White House (Buffer Drops To Zero In 2018!)

The fight continues over Fannie Mae and Freddie Mac, the mortgage giants in conservatorship with their regulator, FHFA, as the buffer for F&F goes to zero in 2018.

(Bloomberg) -By Joe Light- While the Consumer Financial Protection Bureau grabs headlines, another independent U.S. regulator is quietly locked in its own showdown with the Trump administration. (CFPB Director Richard Cordray stepped down and tried to appoint his own successor Leandra English. The Trump Administration wanted to appoint Mick Mulvaney, who serves as head of the Office of Management and Budget. A court ruled that Trump has the authority and Cordray did not.)

The Federal Housing Finance Agency is in deep discussions with the White House over what to do with more than $7 billion owed to the government at year-end by Fannie Mae and Freddie Mac.

FHFA officials in negotiations have said they want Fannie and Freddie to keep $2 billion to $3 billion each as a buffer against losses, according to people familiar with the matter. Administration officials in exchange want to limit the mortgage giants’ market footprint by steps such as tightening restrictions on the size of loans they back, according to the people, who requested anonymity because the talks are private.

The ongoing negotiations could face a de-facto deadline at the end of December, when Fannie and Freddie are scheduled to pay $7.7 billion to the U.S. Treasury. If FHFA Director Mel Watt chooses to withhold some of that money without the administration’s sign-off, it could set off another firestorm between President Donald Trump and an independent agency led by an appointee of his predecessor Barack Obama.
Spokeswomen for the FHFA and the Treasury Department declined to comment.

Bailout Agreements
Fannie and Freddie don’t make mortgages. They buy them from lenders, wrap them into securities and give guarantees to make mortgage-bond investors whole if borrowers default.

The FHFA negotiations stem from the bailout agreements struck when the government took control of the companies in 2008. Fannie and Freddie eventually received $187.5 billion to weather the financial crisis, and in exchange taxpayers received a new class of senior preferred stock that paid a 10 percent dividend, along with warrants to acquire nearly 80 percent of their common stock.

In 2012, the Treasury and FHFA, which controls Fannie and Freddie, amended the agreements. Instead of a 10 percent dividend, taxpayers each quarter receive a dividend equal to all of the companies’ net worth above a specified capital buffer. (This is the infamous “profit sweep” that helped fund the dying Obamacare healthcare law).

Zero Buffer
That buffer is $600 million each this year, but drops to zero in 2018. At that point, Fannie and Freddie would need another bailout from Treasury to cover even small quarterly losses. The companies have $258 billion to draw on from the U.S. Treasury if needed, but that amount can’t be replenished with future profits. If the companies make their fourth-quarter payment as scheduled, they will have paid taxpayers a combined $283.6 billion.

At the center of the conflict is Watt, a former Democratic congressman picked by Obama to lead the agency in 2013. After fierce opposition from Senate Republicans who tried to block his confirmation, Democrats changed the rules to eliminate the use of the filibuster for some presidential nominees, enabling Watt to get through.

After becoming director, Watt exhibited an independent streak, making moves that irked Democrats and Republicans alike. The behavior won him the respect of many Republican lawmakers. They’ve limited their criticism of Watt even as they lambasted former CFPB Director Richard Cordray, who set off a public battle over the agency’s leadership last week by trying to put his chief of staff in charge as he walked out the door.

Investor Confidence

Watt has said that his concern is with how mortgage-bond investors might react if Fannie and Freddie begin to draw funds from the remaining Treasury commitment. For now, many investors treat the companies’ mortgage-backed securities as if they have no risk of losses from borrower defaults. Watt has said that perception could change if the $258 billion line of credit is being tapped to cover losses.

“We reasonably foresee that this could erode investor confidence,” Watt said at a House Financial Services Committee hearing in October. “This could stifle liquidity in the mortgage-backed securities market and could increase the cost of mortgage credit.”

The possibility of losses is more than theoretical. Freddie Mac in 2015 and 2016 posted small quarterly losses as a result of a quirk in how the company accounted for interest-rate hedges. The capital buffer kept the company from needing bailout money.

One-Time Loss
Fannie and Freddie could also face one-time losses if Congress passes a bill that reduces the corporate tax rate. That’s because the change would reduce the value of Fannie and Freddie assets that can offset taxes.

The $2 billion to $3 billion requested by FHFA officials could withstand a small loss but likely wouldn’t be enough to protect against a cut in the corporate tax rate.

Treasury Secretary Steven Mnuchin has publicly said he expects the companies to pay their dividends as scheduled.

In the private talks, administration officials have suggested that FHFA agree not to raise the size of a mortgage that Fannie and Freddie can buy. That so-called conforming loan limit currently stands at $424,100 for most of the U.S. and at $636,150 for areas with the priciest homes.

On Tuesday, FHFA raised the limit for most areas of the U.S. to $453,100 for 2018. The agency raises the limit based on changes to its own home-price index, pursuant to the law governing the agency. It’s unclear what discretion the FHFA would have in taking steps to limit the increase.

Private Capital
Trump administration officials have said they want to increase private capital’s role in the mortgage market, a goal that could be furthered by freezing the loan limit.

FHFA officials have resisted the administration’s request to stop a loan-limit increase, the people said. Complicating matters, Watt has publicly said that he believes the companies’ bailout agreements allow him to withhold some or all of the dividend without White House approval.

Some lawmakers have urged Watt to let the companies keep capital, while others have said the move could be interpreted as an early step toward fully recapitalizing the companies and releasing them from government control. Watt has been adamant that he won’t recapitalize and release the companies without congressional approval.

Retaining a combined $4 billion to $6 billion from a quarter where the companies owe $7.7 billion would allow the companies to make partial payments rather than stopping the dividends completely.

Of course, if the bond and housing markets are in a bubble and they burst/shrink, Fannie Mae and Freddie Mac are likely to suffer negative earnings again and will require a bailout. Then again, so will a number of banks.

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