The U.S. household unemployment rate fell to a five-year low of 7 percent and nonfarm payrolls rose by 203,000 in November in a strong jobs report that will raise expectations that the Federal Reserve will reduce its stimulus sooner than expected.
KEY POINTS: * Nonfarm payrolls increased by 203,000 new jobs last month, the Labor Department said on Friday. The unemployment rate dropped three tenths of a percentage point to its lowest level since November 2008 as some federal workers who were counted as jobless in October returned to work after a 16-day partial shutdown of the government.
* Job gains for September and October were revised to show 8,000 more jobs created than previously reported, lending strength to the report. Other details were also upbeat, with employment gains across the board, hourly earnings rising and the workweek lengthening.
RICHARD FRANULOVICH, SENIOR CURRENCY STRATEGIST, WESTPAC, NEW YORK:
"A strong overall report, strong details as well. It keeps the December tapering risk alive from the Federal Reserve."
MICHAEL WOOLFOLK, SENIOR CURRENCY STRATEGIST, BNY MELLON, NEW YORK:
"We feel this is consistent with material improvement as regards unemployment, however, we've seen no improvement yet in participation. The nonfarm payrolls number is probably not enough to persuade the Fed to taper in December. We still think the earliest they move is March. The unemployment rate dropping to 7 percent is good but the Fed is more focused on the participation rate picking up. Elsewhere, are focusing today on personal income and spending, too. Spending picked up, and that's consistent with a better-than-expected holiday shopping season. We think this will feed a Santa Claus rally going into the end of the year."
STEPHEN CUCCHIARO, CHIEF INVESTMENT OFFICER OF WINDHAVEN INVESTMENT MANAGEMENT, BOSTON:
"The stronger-than-expected employment report could increase speculation that the Federal Reserve will taper earlier than expected, perhaps as early as their next meeting on December 17-18 - which is why the markets have been correcting in the last few days. However, the Fed could point to falling inflationary expectations and increased fiscal uncertainty given the continued government gridlock as reasons to delay tapering. Because the market is pricing in some probability of a December taper, a taper delay could spark a year-end rally in stocks. We are still overweighting U.S. equities."
TOM PORCELLI, CHIEF U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK:
"This was a constructive report overall and not so much because jobs gains were better than expected but mostly because wages improved quite nicely. That stands out as the more critical during this economic cycle than anything else in the report. Wages are strongly driving consumption in this cycle more than any other time. Overall wage gains were the most compelling news in this data."
ERIC STEIN, CO-DIRECTOR, GLOBAL INCOME GROUP, EATON VANCE INVESTMENT MANAGERS, BOSTON:
"It's a very solid number, not only on the non-farm payrolls side, but with the unemployment rate falling by 0.3 percentage point and the labor force participation rate up. The U.S. labor market is still far from healed, but it certainly is moving in the right direction. This number puts a December taper on the table, but it isn't a certainty."
MICHAEL MARRALE, MANAGING DIRECTOR, HEAD OF RESEARCH SALES AND TRADING AT ITG IN NEW YORK:
"My view is show me inflation and I will show you tapering. I don't think the Fed is in a big rush to do anything drastic in the absence of inflation. A few strong jobs numbers does not mean we are out of the woods. That said, we are in a very good spot and we can offset growth with tapering and we come out of this in one piece.
"On a short term basis, it's good news, good news gets sold, that's just the way to trade stocks. But I don't think we look back a month from now and say ‘wow that was a pivotal point in the market.' The market has very strong footing here into year-end."
THOMAS DI GALOMA, CO-HEAD OF FIXED INCOME RATES AT ED&F MAN CAPITAL, NEW YORK:
"Very solid jobs data all around. Three percent 10-year yield here we come, but I don't think a taper of the Fed's purchases is in the cards for December."
OMER ESINER, CHIEF MARKET ANALYST, COMMONWEALTH FOREIGN EXCHANGE, WASHINGTON D.C.:
"The number looks pretty good to me as it not only beat expectations not only on the headline number but we saw a sharp drop in unemployment. The increase in labor force participation rate and importantly household survey showed a healthy rise in job creation. This keeps alive dwindling hope of Federal Reserve tapering this month. This report is a little more consistent with an improving jobs market and the dollar should get bit of a bid on this news."
STOCKS: U.S. stock index futures added to gains before pulling back
BONDS: U.S. bond prices slipped, boosting yields
FOREX: The dollar rose against the yen and euro
(Americas Economics and Markets Desk; +1-646 223-6300)