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Non-Farm Payroll Brings "Just" 261K Jobs, Unemployment at 4.1%

Friday, November 3, 2017

Ahead of today’s opening bell, we see a surprising number for October non-farm payrolls from the Bureau of Labor Statistics (BLS): 261K new jobs were filled last month. The unemployment rate went down a tick to 4.1%.

This headline was such a surprise because analysts had expected a much bigger bounce-back in employment following the massive hurricane season that rocked the American coasts the previous month. The unemployment rate, by the way, is the lowest it’s been since 2000.

Private sector jobs reached 252K last month, led by Food and Drink Establishments (89K) and Professional/Business Services (50K). Retail lost 80K jobs last month, and Mining was down as well. The Labor Force Participation Rate stayed steady at 62.7%, while the overall labor force shrank by 750K workers.

In fact, many of these numbers beneath the headline are quite healthy; not just the unemployment rate at 4.1%, but the U-6 number (aka “real” unemployment) went to 7.9%, the lowest this figure has been since 2007, a year before the Great Recession. We also saw upward revisions to the past two months, including a swing to the positive in September from -33K initially reported to +18K today. Including the upward August revision, non-farm payroll gained an additional 90K jobs, and the 3-month average is +162K, more than enough to keep the U.S. labor market steady.

One area that does look a bit weak is Average Hourly Earnings, which actually dropped by a penny overall last month. In the past year, we’ve seen robust jobs growth, all-time highs in the stock market indexes and record corporate profits (even before cutting the corporate tax rate), but wage growth is up just 2.4% during that time span. In short, wage growth is simply not keeping up with the rest of domestic economic growth.

Will this be enough of a concern next month for the Fed to decide against raising interest rates? Odds prior to today’s employment numbers that the Fed would raise another 25 basis points was north of 80%, but would this group — which has been more cautious than market participants — be more interested in keeping interest rates lower for longer as a result of these latest numbers?

Long Lines at Apple Stores

It would appear this morning that the iPhone X — the $999 phone Apple AAPL unveiled earlier this year, and began taking advanced orders for last week — is already a hot item. In fact, this launch is bringing the biggest crowds outside Apple stores we’ve seen in the past few years. Some analysts saw the dual unveiling of the less-expensive iPhone 8 at the same time as the X to be at risk of cannibalization, but based on the long lines we’re currently seeing, the world’s largest gadget maker has nothing to worry about.

In fact, the company has been very upbeat on the iPhone X in projections released yesterday afternoon in its Q4 2017 earnings report: not only did Apple beat estimates by a wide margin on both top and bottom lines, but boosted revenue guidance for fiscal Q1 2018 to $84-87 billion (Q4 brought roughly $52 billion). While a lot of this boost is related to the all-important holiday sales this quarter, iPhone X looks to be a big part of the Apple story going forward. AAPL shares are up 4% in today’s pre-market.

Mark Vickery
Senior Editor

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