Treasuries remained well bid this morning following yesterday’s slew of headlines, including a BOE rate hike, the House’s tax bill, and Jerome Powell’s nomination for Fed Chair. Prices remain higher immediately following the release of the October jobs report, which showed solid payrolls gain but weaker wage and household data. On the tax reform front, the House’s bill largely met expectations, and it will likely change significantly before/if it becomes actual law.

Nonfarm payrolls added 261,000 jobs in October following the hurricane-driven 33,000 decline the prior month. The October figure was actually below expectations (313,000), but the September figure was revised higher to 18,000 (+51,000). Perhaps the biggest focus for investors in today’s report (and the last several) was wage growth, particularly following the big wage gains in September.  Despite the Labor Department stating that the establishment survey data was clearly affected by the hurricanes in Texas and Florida (which pushed payrolls lower), some investors/observers dismissed that disclaimer when it came to the robust wage data. The October data can be viewed as a correction, with average hourly earnings unchanged versus the prior month (+0.2% expected), and wages were up just 2.4% on a year-over-year basis, the lowest annual pace since February 2016.

The household data was disappointing as well, although the headline unemployment rate did fall again to 4.1% (lowest since December 2000). The decline in the headline rate was primarily attributable to a 765,000 reduction in the official labor force, which outpaced the 484,000 decline in household employment (participation rate lower).

Today’s report is not necessarily bad; there’s just appears to be a lot of noise in the last two months related to the hurricanes. The bigger area of focus for the labor market in the coming months will continue to be wage growth. That said, Fed leaders have suggested that current wage and inflation levels are sufficient to continue with gradual policy tightening.

Jason Haley
Managing Director, Investment Management Group

Date TimeEventSurveyActualPriorRevised
11/3/2017Change in Nonfarm Payrolls313k261k-33k18k
11/3/2017Two-Month Payroll Net Revision90k
11/3/2017Change in Private Payrolls302k252k-40k15k
11/3/2017Change in Manufact. Payrolls15k24k-1k6k
11/3/2017Unemployment Rate4.20%4.10%4.20%
11/3/2017Average Hourly Earnings MoM0.20%0.00%0.50%
11/3/2017Average Hourly Earnings YoY2.70%2.40%2.90%2.80%
11/3/2017Average Weekly Hours All Employees34.434.434.4
11/3/2017Labor Force Participation Rate63.10%62.70%63.10%
11/3/2017Underemployment Rate7.90%8.30%
11/3/2017Trade Balance-$43.2b-$43.5b-$42.4b-$42.8b
11/3/2017Markit US Services PMI55.955.9
11/3/2017Markit US Composite PMI55.7
11/3/2017ISM Non-Manf. Composite58.559.8
11/3/2017Factory Orders1.20%1.20%
11/3/2017Factory Orders Ex Trans0.40%
11/3/2017Durable Goods Orders2.00%2.20%
11/3/2017Durables Ex Transportation0.70%
11/3/2017Cap Goods Orders Nondef Ex Air1.30%
11/3/2017Cap Goods Ship Nondef Ex Air0.70%
11/6/2017Mortgage Delinquencies4.24%
11/6/2017MBA Mortgage Foreclosures1.29%
11/7/2017JOLTS Job Openings6082
11/7/2017Consumer Credit$18.250b$13.065b
11/8/2017MBA Mortgage Applications-2.60%
11/9/2017Bloomberg Nov. United States Economic Survey
11/9/2017Initial Jobless Claims230k229k
11/9/2017Continuing Claims1884k
11/9/2017Bloomberg Consumer Comfort51.7
11/9/2017Wholesale Trade Sales MoM1.70%
11/9/2017Wholesale Inventories MoM0.30%0.30%
11/10/2017U. of Mich. Sentiment101100.7
11/10/2017U. of Mich. Current Conditions116.5
11/10/2017U. of Mich. Expectations90.5
11/10/2017U. of Mich. 1 Yr Inflation2.40%
11/10/2017U. of Mich. 5-10 Yr Inflation2.50%
11/10/2017Monthly Budget Statement$8.0b