Jobs Week

As is the routine in the world of the mortgage and bond markets, the beginning of each month gives us a new set of employment numbers. As we have discussed, employment is currently the main focus of the Federal Reserve (“the Fed”). The Fed has already acknowledged that their other focus, inflation, is going to slowly decline over time. This has caused them to make most of their policy decisions based on reactions to how they feel jobs are fairing in the US.

The big reports that we saw were: October JOLTS (Job opening and labor turnovers), November ADP Employment Report, and November BLS (Bureau of Labor Statistics) Jobs Report.  These released on Tuesday, Wednesday, and Friday, respectively.

Even though the JOLTS report is a month old, it still contains some data that is worth digesting. It reported 7.74M job openings – more than the expected 7.5M. The previous monthly number was revised lower slightly. This time of year does typically bring more seasonal jobs as retailers prepare for the holiday season. The important Quit Rate that is contained in the JOLTS report rose from 1.9% to 2.1%. When employees don’t quit their jobs, it is usually indicative of a poor job market. This move to the better is only marginally higher than the lowest rate since 2015 that we saw last month, showing continued weakness in the job market. The Hiring Rate fell from 3.5% to 3.3%, the lowest rate since 2013, excluding COVID.  As we have discussed before, the headline Job Openings numbers can also be misleading because in our post-COVID world, employers may now list the same job in several different locations, creating a perception of additional jobs available. This data was generally well received by the markets and saw improved rates.

ADP’s November report showed 146,000 jobs were created in the private sector of the economy. The market was expecting 160,000. October’s report was also revised lower by 49,000. Seasonal adjustments continue to push these numbers artificially higher. The actual job figure was only 63,000. Normally, we see negative seasonal adjustments to counter the seasonal hiring that is only for the Holiday season. All the job gains were found in large businesses. Mid-sized and small businesses lost jobs.

The BLS Jobs Report for November had a strong headline of 227,000 job creations on the Business Survey. Remember, this report has both a Business Survey and a Household Survey component. The market was estimating 214,000. Normally, the market would take this as good news for the economy and bad news for rates. Digging a little deeper, we can see some real weakness in the report. 

The Household Survey is where the BLS calls households and asks them questions about their employment status. If they haven’t been looking for work in the past four weeks, defined as doing an interview or submitting an application, they are removed from the workforce and are no longer considered unemployed. This month showed 161,000 additional unemployed people while the labor force shrunk by 193,000. The unemployment rate rose to 4.246%, which is rounded down to 4.2%. If we didn’t remove the 193,000 people from the labor force, the unemployment rate would have been 4.4%. 

Out of the jobs that were lost, 111,000 were full-time jobs and 268,000 were part-time jobs. The report also tracks the age ranges of job holders. This month showed that all age ranges lost jobs except 16-19 year olds. Most of the job losses (204,000) were in the most important 25-54 range. People stayed unemployed longer than they did last year. In November 2023, it took 19.5 weeks to find a job. Now, in November 2024, it took 23.7 weeks. This weakness has caused rates to improve.

Looking Ahead:

Wednesday: CPI, 10 year Treasury Auction

Thursday: Producer Price Index (PPI Wholesale Inflation), 30-year Bond Auction