US November job market's strength may surprise investors

Washington

INVESTORS primed for moderation in the US labour market may be surprised by the strength of November's jobs report, though some cooling is still likely in 2019.

Seasonal, weather and industry factors are set to prop up the employment and wage figures due on Friday from the Labour Department. Some Americans returned to work following hurricanes in the prior two months, while retail and related industries probably hired aplenty for what is expected to be a strong holiday-shopping period. Also, Amazon.com Inc's Nov 1 wage hike may help pay.

"We're not falling off a cliff," said Scott Anderson, chief economist at Bank of the West. "In fact, we're expecting to see pretty good wage growth in these numbers. It's still a very decent job market out there."

While the broader economy may be starting to manifest signs of a slowdown, "that's not going to show up in Friday's payroll numbers", he added.

Strong employment figures - fed by steady demand from consumers and companies, and tax cuts earlier this year - would contrast with sentiment in financial markets, which were whipsawed anew on Tuesday by trade policy uncertainty. Part of the Treasury yield curve inverted on Monday, a possible harbinger of recession, as traders started betting on Federal Reserve interest rate cuts as soon as 2020.

That followed a week of wild swings including a stock rally on Monday amid hope for a thaw in the trade war between the US and China, and gains last week following comments by Fed chairman Jerome Powell seen as indicating that the central bank is less inclined towards additional interest rate hikes.

"After the past two days, the markets are now pricing in weaker than expected numbers in Friday's employment report," said Matt Maley, equity strategist at Miller Tabak + Co. "Therefore, if the data is either in line or better than expected, we should see another big reversal in both the stock and bond markets."

US markets were closed on Wednesday for a national day of mourning for former president George HW Bush.

While the median estimate of economists for a November gain of almost 200,000 jobs is below October's 250,000, that is still more than healthy and in line with the average of the past two years. Average hourly earnings are projected to advance 3.1 per cent from a year earlier for a second straight month, after topping 3 per cent for the first time in nearly a decade. The unemployment rate probably held at 3.7 per cent, the lowest since 1969.

November will contain the tail end of the storm impact. Some Americans were still getting back to work following Hurricane Michael in October, and even Florence in September, where millions were asked to evacuate and recovery efforts are still ongoing. Amazon's bump-up in its minimum hourly wage to US$15 last month added to pressure among other firms to find and retain employees, likely boosting pay beyond just the Internet retailer.

More broadly, retailers geared up for the holiday shopping season with a spree of their own: Societe Generale SA senior US economist Omair Sharif said that industry hiring will rebound after averaging a decline in recent months, while outplacement firm Challenger, Gray & Christmas Inc tallied seasonal hiring in 2018 at the highest in seven years of tracking.

That could filter into other industries tied to retail, including transportation and warehousing, according to Lydia Boussour, senior economist at Oxford Economics. BLOOMBERG