In our preview of the December payrolls report, we said that the big risk is a big upside surprise in the form of “good news being bad news”, and sure enough, and that’s precisely what happened when the BLS reported that in December the US added a whopping 312K jobs, far above the 184K expected, and the highest since February 2018. The total number of payrolls surged above 150 million for the first time ever, to 150.263 million to be specific.
Putting the number in context, this was the biggest beat since June 2016… which may not be such a good thing as the last 2 big beats both saw a big plunge the next month.
It wasn’t just the scorching payrolls number, but also the average hourly earnings print, which jumped by 3.2%, higher than both the November 3.1% and the 3.0% consensus; in fact it was the highest number since April 2009!
The unemployment rate rose from 3.7% to 3.9%…
… as the labor force participation rate rose above 63% for the first time since March 2014.
So what does the Fed do now: pressured on both sides, on one hand by the sliding market which demands rate cuts, and on the other by the overheating labor market where wages appear to be on the verge of breaking out.
developing.
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