48,000: The difference between the three-month average jobs added now and July.
Nothing puts the joy in holidays like a burst of job growth.
Friday’s employment report showed the U.S. economy generated 203,000 new jobs in November on top of 200,000 added in October. Payrolls have grown by an average of 193,000 in the past three months, up from 145,000 in the three months ended July.
The mix of job gains also is encouraging. Traditionally high-paying sectors such as manufacturing and transportation helped to pace hiring. An increase in the average hourly wage coupled with the total job gain and a longer workweek suggest a healthy increase in November personal income.
What’s strange about the numbers is the timing: Businesses are hiring strongly in a quarter that is on track to post fairly weak output growth (thanks in large part to the third quarter’s inventory buildup). That raises the question: is the burst of hiring a catch-up for businesses that held back, or a sign of new momentum? The answer matters because makeup job growth won’t last.
The problem is that we will need to see more information on demand to know whether the U.S. has actually entered a virtuous cycle of more demand generating more jobs and income, which adds to demand. The economy has given a head fake before, and the ho-hum start to holiday buying is a reason to be cautious now.
The strong employment numbers also don’t guarantee the Federal Reserve will announce tapering its bond-buying program at its Dec. 17-18 meeting.
One argument against tapering is the unemployment rate. It has been falling this year–but for the wrong reason: people are dropping out of the labor force, presumably because they don’t think there are jobs. That means labor markets have more slack than the official 7.0% jobless rate suggests.
Another reason the Fed may decide to hold off is the lack of momentum in the corporate sector.
True, businesses seem to be hiring again but companies aren’t investing in new plant and equipment at a pace that will keep inflation low and boost productivity and living standards in years to come. Rising interest rates could slow the rate of investment spending even further in 2014.
Other factors will play into the Fed’s decision, including the upcoming exit of Chairman Ben Bernanke and fiscal issues. The jobs report adds ammunition for those in the taper camp, but it will be just one facet of the policy discussion.