On the December Jobs Report
Following a miss in net payrolls this morning, markets have focused on the hawkish implications for the Fed of the beat in average hourly earnings – which we think should not have been a surprise considering last month’s negative reading. Overall this report had more for the doves. The “household survey” showed only 62,000 net new jobs, and a loss of 685,000 on a “payroll basis.” The unemployment rate ticked up as the labor market expanded, with most new entrants unemployed. The probability of finding a job fell sharply. The Fed has now said it is tolerant of an “undershoot” in unemployment, but now at 4.72%, the unemployment rate is within the Fed’s normal range of 4.7% to 5.0%.