Growth in Non-Farm Payrolls

The benchmark US. employment count, which seasonally-adjusts the sum of public and private sector hiring, came in stronger than expected in November at 203K (versus consensus of 185K), and the unemployment rate trended lower to 7.0%. Even with these better than expected numbers, we do not expect the Federal Reserve to decrease (ie. “taper”) its monthly bond-buying program...yet. Three factors contribute to the Fed pushing out the inevitable decision to taper. First, the job participation rate remains depressed. If we assumed the total labor force was a constant number since 2008, we would actually be seeing an unemployment rate closer to 11.3%. The participation rate remains the lowest it has been since the early 1980’s making it “easier” for unemployment to continue to tick down. Second, the six-month moving average for payroll growth at 176K remains below the figure mentioned in previous Fed press conferences of 200K. Third, U-6, a broader measure of U.S. employment cover individuals who are under-employed (involuntary part-time workers), remains elevated. Given the unemployment challenges the U.S. faces combined with inflation consistently below +2% (the Fed’s preferred gauge of inflation was reported at +1.1% y/y, down from +1.2% last month), we believe a tapering announcement is unlikely when the next Federal Open Market Committee statement is released next week.