US employers added more jobs than expected in November, another sign the US economy is on the mend, though not yet healed. The jobs report released Friday suggests that ongoing worries about the “fiscal cliff” and weak European economy haven’t derailed the US recovery that began in 2009. But that could change if Washington can’t reach an agreement on a fiscal deal that doesn’t raise taxes or cut spending too quickly. Moreover, despite an improving housing market and lower gas prices, the prospect of higher taxes are beginning to impact consumer habits more than previously thought. This was evident in the Thomson Reuters/University of Michigan preliminary consumer sentiment index for December, which plummeted to a four-month low reading of 74.5, compared to 82.7 in November.
On Friday, the Bureau of Labor Statistics reported that employers added 146,000 jobs in November, in-line with the ~150,000 average monthly increase posted during the past two years. Due to the definition of weather-related job losses, Hurricane Sandy had little effect on the national figures for November, but will likely have an impact in December. The nuances probably caused some of the difference between the report and economists’ estimates, which called for an 85,000 increase according to Bloomberg. Although the headline gain of 146,000 jobs was better than anticipated, some of the enthusiasm was tempered because the Bureau revised its previously reported employment estimates for September and October. It lowered October’s job gains from +171,000 to +138,000, and September’s from +148,000 to +132,000. We think there’s a good chance the November report may see a revision, given the timing of the Hurricane. In terms of industries, the gains in November weren’t as broad-based as those reported in October. The results were largely driven by retail (+51,000), professional & business services (+43,000), and healthcare (+20,000). Unfortunately, the construction and manufacturing sectors both shed jobs after posting gains in October. Wage growth remains anemic. Average hourly earnings for employees on private nonfarm payrolls rose by a meager 4 cents to $23.63. Over the past 12 months, average hourly earnings have risen by just 1.7%. That ought to put a lid on disposable income for the foreseeable future, particularly if taxes increase next year.
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