US Jobs Stronger than Expected, but not Enough for Fed to Taper

The US November jobs data are generally stronger than expected.  The non-farm payrolls rose 203k and the private sector added 196k jobs.  These numbers are only slightly above the long-term averages.  The unemployment rate fell to 7.0% from 7.3% in Oct.  This reflected a 818k rise in the household survey (offsetting in full the 735k decline in Oct).  The participation rate actually rose to 63.0 from 62.8.  

The closure of the government and the re-opening suggests a two month average offers a more accurate read, which as we noted, is fairly steady job growth in the US.  

The other details are nothing to write home about.  Average hourly earnings rose by 0.2%, but the year-over-year rate slowed to 2%.  The work week increased by 6 minutes to 34.5 hours.  It has been bouncing between 34.4 and 34.5 for most of the year.  

Separately, the US reported that personal income in Oct fell 0.1%, compared with the 0.3% gain expected.  Spending rose 0.3%, a little better than expected.  The core PCE deflator slowed to 1.1% from 1.2%.  

There are some observers who will play up the risks of a Dec tapering because of the employment report.  We lean in the opposite direction.  It is not just about employment, which remains largely steady.  It is also about inflation, or better said, disinflation.  In addition, we see  no advantage but several disadvantage for the Fed to taper at what could very well be Bernanke's last FOMC meeting.  

The dollar initially rallied across the board on the headline news, but the gains were quickly pared against the euro, sterling and Swiss franc.   The dollar bloc remains under pressure as does the yen (with 10-year yields rising.to 2.9% and new 3-month highs) 

Canada appeared to have a strong employment report as well with 21.6k jobs created, nearly double what the consensus expected.  However, these were mostly part-time positions.  Full time jobs rose 1.4k.  

Given the unprecedented jump in US inventories in Q3, most economists look for a slowdown in Q4, back toward 2%.  Today's employment report is unlikely to change that view.