November’s jobs report to show pick-up in pace from October, but mostly because of GM effect

Job growth should appear strong in November as striking GM workers returned to the workforce.

Economists surveyed by Dow Jones expected 187,000 jobs were added in November, and Refinitiv’s consensus forecast was 180,000. Wages are expected to rise by 0.3% in the month, and unemployment is expected to remain at 3.6%. The government’s monthly employment report is released at 8:30 a.m. ET Friday.

“I think we’ll see 215,000 payrolls,” said Ward McCarthy, chief financial economist at Jefferies. “I think the big feature will be the reversal of the negative affect of the GM strike. I think we’ll see manufacturing payrolls up by about 50,000.”

The economy added 128,000 jobs in October, including the negative impact of the General Motors strike, which reduced vehicle and parts manufacturing jobs by 42,000.




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But even if November nonfarm payrolls hit the 200,000 expected by some economists, the trend of job growth has downshifted to something more like 150,000 when excluding the GM effect. For the year so far, monthly job growth has averaged 167,000, compared to 2018′s pace of 233,000.

According to government data, the economy has added 1.67 million jobs for the year, as of October, and that’s the slowest growth since 2010, when just 838,000 payrolls were added through October.

The most sluggish pace in the last five years was 2017, when 1.76 million jobs were added through October. Last year, 2.26 million were added.McCarthy said the sluggishness this year has a lot to do with a lack of available workers, but also some impact from the trade war.

“The labor market reflects the economy but also reflects the number of heads around that you can hire. The economy is not a problem for the labor market now. The problem is there’s not enough people. There are shortages in food services, construction.”

McCarthy said trade has also impacted hiring. “It’s been a factor in manufacturing, and any trade dependent service jobs have probably struggled as well,” he said. “That’s a pretty small piece of the economy.”

ADP’s payrolls reported this week showed just 67,000 jobs added in November, a surprising decline. The surprise weakness in the ADP number was due in part to a loss of 18,000 goods-producing jobs that were from natural resources, mining, construction and manufacturing.

Trade, transportation and utilities, usually a robust sector, declined by 15,000, and information services fell by 8,000. Small business was also hit, with a decline of 15,000 workers in businesses with fewer than 20 employees.

Joseph Song, senior economist at Bank of America Merrill Lynch, said he expects 195,000 jobs in the government report, and without GM workers, the number would be closer to trend at 150,000.

Economists say 150,000 is still a decent level of growth, and the economy needs about 100,000 jobs to grow.

“We’re expecting the job market to stay on this steady trajectory,” Song said. “That said the ADP number we got a few days ago suggests there could be some downside risk. It wasn’t just manufacturing. It was trade and transportation…That would be because businesses are not buying as many Chinese goods, so the need for truckers and shippers are declining.”

Economists do not expect the report, or even a slower pace of job growth to impact the Fed, which meets next week.

“Barring something that’s teeth rattling, it’s really not going to have an effect on monetary policy,” McCarthy said.

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US stock futures rise ahead of November’s jobs report

U.S. stock index futures traded higher on Friday as investors awaited the release of the government’s latest jobs report.

Around 7 a.m. ET, Dow Jones Industrial Average futures were up 75 points, indicating a gain of more than 70 points at the open. S&P 500 and Nasdaq 100 futures also rose.


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The Labor Department is scheduled to release U.S. employment data at 8:30 a.m. ET. Economists polled by Dow Jones are expecting 187,000 jobs added in November — one of the highest estimates this year ahead of a jobs report.

The data is expected to reflect a temporary boost from striking General Motors autoworkers returning to work. Unemployment rate data and average hourly wages for November will both be released at the same time.

Other data slated for release Friday includes consumer sentiment for December, wholesale trade figures for October and the latest reading of consumer credit will all follow slightly later in the session.

Market focus is largely attuned to global trade developments, following an upbeat tone from President Donald Trump.

On Thursday, Trump said the world’s two largest economies were inching closer to a trade deal. His comments come as investors continue to closely monitor the prospect of a so-called phase one trade agreement, with less than 10 days to go before Washington is poised to impose even more tariffs on Chinese goods. Tariffs on another $156 billion in Chinese goods are set to go into effect on Dec. 15.

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Jeff Bishop’s Total Alpha Strategy | Midweek Market Update (12/5/2019)

Congratulations, you’ve almost made it through the trading week…and what a roller coaster ride it’s been! Let’s get you squared away with where things stand after some wild market action with the midweek market update.

The SPY managed to fill the gap today left open from Monday’s massive decline. That comes after a sharp reversal Tuesday that took most of the day to play out.

SPY hourly chart

Earlier this week, I said I expected the market to make its way to the hourly 200-period moving average…which is exactly where it stopped. And I will put my money where my mouth is.

Total Alpha Portfolio midday yesterday.

That’s why I look at the other markets, including Bonds, Gold, and the Dollar, for additional information.

Equity winners – Small caps, energy, utilities, and consumer staples

As I outlined at the beginning of this week, I expected small caps to outperform the broader market. The weekly close above the trading range that bound it all year told me it wants to move higher.

IWM weekly chart

We’re already seeing the IWM outperform the SPY by 0.15% in the last three days. That’s come at the expense of the QQQ, which underperformed by 0.32%.

The real high flyer comes from the least likely of places. Energy stocks (XLE) are down a paltry 0.36% compared to the SPY 1.02%. Much of that comes on the back of rallies in both natural gas and crude oil.

XLE hourly chart

Crude oil itself is up 5.17% this week. However, it finished down 4.75% last week when the SPY gained 0.75%…so it’s really just playing catchup and adding a bit to the top.

Natural gas looks more like an oversold bounce. The commodity fell a whopping 17.09% last week, creating a pop this week of 3.97%. It’s got a very long way to go before it shows any semblance of strength.

Utilities continue to perform well alongside bonds. The cheap yields in treasuries force safety investors to search for return, which often drives them into high dividend stocks.

XLU hourly chart

Those with a little more risk tolerance tend to stick with consumer staples. They may have smaller dividends, but offer more exposure to growth.

XLP hourly chart.

Safety Trade Outperformance

Bond ETFs also performed exceptionally well off the back of equity declines, up 1.2% for the week.

TLT hourly chart

This is a crucial hint. For the majority of the year, bonds and stocks traded together. We only saw them decouple and trade opposite one another this week (historically normal behavior).

Following a close second are the gold ETFs. GLD climbed 1.17% this week so far.

GLD hourly chart

Poor performers – The Dow, transports, and the dollar

The biggest loser this week so far has been the Dow Industrials (DIA). Though a small index, it’s down 1.58% on the week.

DIA hourly chart

The real loser this week has been transports. They’ve been just obliterated. The IYT ETF is down 2.88%, nearly double the Dow’s performance.

IYT hourly chart

This could be a harbinger of doom for any Dow theorists.

The real head-scratcher is the dollar. No matter when you looked, the dollar had been the strongest performing area week after week, month after month. So it’s a bit shocking to see it down 0.68% on the week.

UUP hourly chart

That may not seem like much to you. But it’s almost a third of the monthly range.

Go no-where – Healthcare 

Here’s an oddball for you. Healthcare stocks are flat on the week. It’s impressive given all the political drag this sector has.

XLV hourly chart.

Most volatile – The VIX

Last week, the VIX printed prices under $12. That’s extraordinarily cheap…and it indicated complacency among investors. It’s not a surprise that the VIX shot up nearly 41.77% at its peak this week, while still settling up 16.63%.

VIX hourly chart

My analysis – we’re heading lower before we head higher

Let’s look at the facts:

  • Equities haven’t seen a selloff since…well it’s been a while
  • Investors didn’t buy enough protection
  • Stocks rose on little volume
  • Now, the VIX shoots through the roof, and all the safety trades outperform
  • But the dollar is noticeably weaker

It’s pretty clear that we’re seeing money move into the safety trades after a monster run. However, even though the volume on the downside was much higher than the upside, it’s still pretty light.

Outside of a news event, we’ll likely float sideways to higher through the end of the week. From there, I expect we’ll see one last push lower before we get our Santa Clause Rally.

How I plan to profit these next two weeks

That’s for me to know and Total Alpha members to find out. There’s plenty of egg nog…so pull up a chair.

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