‘One of the Weirdest Reports’: Investors React to the Jobs Data

(Bloomberg) -- The U.S. employment report for November is a tale of two very different surveys: The establishment survey suggests employment rose just 0.1% in November, but the household survey suggests employment surged by 0.7%.

Some market watchers aren’t quite sure what to make of the data:

“One of the weirdest reports I have ever seen,” said Danny Dayan, chief investment officer at Dwd Partners.

“The yield curve should be steepening on this in a big way, but rates market participants may be too wary to try that again.”

Dennis DeBusschere of 22V Research says:

“WOW ... OK. This number was all over the place. Significant miss on the headline number. But that’s not the story. The u-rate declined significantly with a slight increase in participation. That is because the household employment number was +1.1 million, which is a huge number. Now, household is a volatile number, but it’s hard not to assume this will ultimately be viewed as a somewhat positive report for the labor market -- unless we are totally missing something on the household reading. So we would fade the move lower in short rates.”

Jefferies economists including Thomas Simons say:

“Retail trade payrolls fell 20K (vs +38K in October), leisure & hospitality payrolls rose only 23K after rising 170K in October and averaging well over 100K for the last few months. We had thought there would be a pickup in both of these, but November was curiously soft on this front. It is not clear if this is a seasonal issue, or some sort of shift in terms of the timing of holiday help, but overall the payroll data does not match up with the alternative indicators of labor market activity that we track.”

Peter Boockvar, chief investment officer at Bleakley Advisory Group, says:

“While the headline number disappointed relative to expectations, the big household survey figure, the rise in the workweek, the increase in the participation rate and employment to population ratio, along with the near 5% average weekly earnings print, all point to a Fed that will quicken the pace of taper as many have said, and we’ll see how that goes before debating rate hikes,” he says.  

“As the internals were better than the headline establishment survey print, the short-end yields are little changed in response. The 10-yr yield is down 1 bp and inflation breakevens are unchanged.”

Carl Riccadonna, Bloomberg Intelligence’s chief industry economist, says:

“This complicates the messaging from the Fed with respect to accelerating the taper process at the December FOMC meeting -- and doing it at a time when job growth is sputtering and case counts accelerating,” he says.

“Nonetheless, Fed officials have been explicit in their communication that they are strongly inclined to adjust the taper at the next meeting. As a result, a Fed charging into mounting headwinds will continue to put pressure on a flatter yield curve -- an unwelcome development for many banks and financial intermediaries.”

JJ Kinahan, chief market strategist at TD Ameritrade, weighs in:

“Obviously, the top-line numbers in the November jobs report disappoint, which is a strange contradiction to the unemployment rate having come down so significantly. This report contains a few head-scratchers: for example, leisure and hospitality are up only slightly, and retail being down is odd for this time of year. But we did see strong numbers in important areas -- warehousing, construction, and manufacturing, to name a few.

“From a market perspective, this has been a volatile week in general, and while the current rally may be top-line related, in terms of perhaps a slower taper, we’ll have to see if that buying momentum and thought process will last.”

Seema Shah, chief strategist at Principal Global Investors:

“Just as the story was starting to come together, the jobs report threw out more questions than answers,” she said. “The November jobs report likely doesn’t change anything for the Fed’s recent hawkish pivot. Keeping monetary policy so accommodative doesn’t seem to have made any meaningful headway with participation, so why continue risking price stability?”

Mike Loewengart, managing director of investment strategy at E*Trade Financial:

“While there’s seemingly a huge miss on the payrolls front, there are significant bright spots -- the unemployment rate is flirting with pre-pandemic levels and the participation rate ticked up. Taken as a whole, there’s likely not enough to go on for the Fed to change its course on tapering. That said, the jury is still out on the long-term effects Covid may have on the workforce, and as we look ahead, omicron is still a giant question mark. We’ll also have to wait to see if this payrolls number experiences any revisions in the January read out -- though as we know a lot can change in a short window of time.” 

Read more: Five Takeaways From the November U.S. Employment Report: TOPLive

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