The November jobs report is one of the key releases ahead of the FOMC meeting on 15-16 December, at which we expect the Fed to raise the Fed funds rate target for the first time since 2006. Our models suggest jobs growth in November was around 175,000, which is below the consensus estimate of 200,000. The main explanation is that employment growth is somewhat volatile.
Our trend employment growth models continue to suggest employment growth close to 200,000 per month. Nonfarm payrolls have increased above 200,000 per month on average so far this year, more than enough to offset the growth in the labour force. As we expect the participation rate to be fairly stable in coming years, we estimate that trend growth in the labour force is around 100,000-150,000 per month. In other words, employment growth would have to decline significantly from its current pace for the development in the labour market to become a concern for the Fed.
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