Cut It Some Slack—U.S. Labor Market Grinds Tighter

If the Federal Reserve wasn’t feeling festive before Friday, November’s employment report may inspire Janet Yellen to start trimming the tree. Employers added 178,000 workers last month and the jobless rate fell to 4.6 percent, a nine-year low. The number of involuntary part-time workers dropped to an eight-year low and the “underemployment” rate, which measures workers who are part-time purely for economic reasons, was the smallest since 2008. Not immune to Scrooges during this season of forced family fun, the antagonists to November’s report made themselves known in the form of falling wages and waning labor market participation. Hourly wages declined for the first time since the end of 2014 to 2.5% on a year-over-year basis and the participation rate ticked down to 62.7%, with more people dropping out of the labor force than joining it. Despite a lump or two of coal in her stocking, Friday’s employment report largely delivered on Janet Yellen’s wish list. As such, the Fed Chair and her compatriots should have the confidence to raise their benchmark interest rate later this month. It should be noted however, that this is fully baked into market prices at this time, so the reaction in the bond market will likely be muted. 

Source: NYTimes, Bloomberg