Market 01/05: Jobs report contradicts household survey

December NFP report: jobs increased more than expected, unemployment rate remains low

1. Number of jobs from NFP payroll survey

BLS report shows that in December, the US added +216,000 jobs (payroll basis - non-farm payroll).

This figure far exceeds the +175,000 estimate and is higher than 65/67 Wall Street estimates, according to Bloomberg survey

However, this figure is likely to be significantly revised downward, even below the expected 175,000 because:

10 out of 11 recent jobs reports have been revised lower:
- September revised down 74,000 jobs
- October revised down 45,000 from +150,000 to +105,000
- November revised down 26,000 from +199,000 to +173,000

By sector, job growth mainly came from:

Education and health care: +74,000 jobs in December
Government: +52,000 jobs in December
Leisure and hospitality: +40,000 jobs in December

These 3 sectors also have stable job growth over the past 2 years:

In particular, the number of jobs for native-born workers has not increased for more than 5 years, since July 2018,
- … while jobs for foreign-born workers have increased strongly.

However, there is a large discrepancy between the BLS jobs report and the household jobs survey:

While the ADP report shows jobs increased by +216,000, the household survey shows a sharp decline of -683,000 jobs.

2. Difference between NFP payroll survey and household survey:

Payroll survey:
- based on non-farm payrolls (may double-count workers with multiple jobs)
- FYI: This month's full-time jobs figure dropped to a record low: -1.5 million jobs — equivalent to April 2020 (Covid recession).
  … while the number of part-time jobs and multiple jobholders increased:
- payroll survey also does not include self-employed and homemakers.
Household survey:
- includes self-employed, homemakers, and other unpaid work,
- not limited to non-farm sectors.

3. Unemployment rate and labor force participation rate

December unemployment rate unchanged from previous month at 3.7%

Among major worker groups, unemployment rates are as follows:

By age: adult men (3.5%), adult women (3.3%), teenagers (11.9%)
By race: Whites (3.5%), Blacks (5.2%), Asians (3.1%), and Hispanics (5.0%)

Long-term unemployment rate rose slightly in December. Number of unemployed for at least 27 weeks increased to 19.7%

Number of people permanently losing jobs decreased in December while the number of temporary layoffs increased slightly

Labor force participation rate in December fell to 62.5% from 62.8% in the previous month and declined for both men and women

This is due to the number of people not in the labor force increasing from 99.695 million to 100.540 million

Of which, the prime-age (25-54 years) labor force participation rate in December fell to 83.2%

4. Average Earnings

Average hourly earnings in December +4.1%Y/Y, higher than the estimate of +3.9% and previous month's +4% Y/Y

Month-over-month, average hourly earnings in December increased +0.44% M/M — the strongest increase since June last year

Wage growth continues to slow for both job changers and those staying in current jobs

ISM Services weakens in November, employment drops sharply

Despite the acceleration of yesterday's Services PMI, ISM Services in December fell from 52.7 to 50.6 - the lowest since May/2023

Services prices index dipped slightly, new orders declined (though still in expansion territory)

Employment index plunged to 43.3 - the sharpest contraction since post-pandemic and even the 2001 recession wasn't this low

Factory orders surge in November - largest jump since January 2021

Factory orders in November rose +2.6% MoM (expected +2.4%) — the largest monthly increase since January 2021.

This increase pulled orders up +3.1% Y/Y

Core factory orders (excluding transportation) only up +0.1% M/M, equivalent to -0.8% Y/Y

Notably, while factory orders increased, the ISM Manufacturing index fell sharply

Red Sea tensions escalate: freight rates soar - will there be a new supply shock?

Global container freight rates up 61% this week to 2.670 USD/container 40ft

On the other hand, spot container shipping rates up 173% due to threats in the Red Sea

Maersk continues to change its decision from last week: now will reroute all ships via Cape of Good Hope to avoid the Red Sea route.
- The world's largest container shipping company also warns customers of severe disruptions in maritime transport.

=> Red Sea tensions continue to escalate, potential for supply shock to return

It seems those sea tensions are continuing to escalate, will there be a new supply shock with the current global inflation situation?

Rent prices fall, housing supply surges

Rent prices down 0.8% M/M in December/2023…

Equivalent to -1% Y/Y - the second worst December in history (since 2017)

This may be due to US apartment supply in 2023 reaching the highest level since 1987, with over 439,000 units completed. More to be completed in 2024.

=> Renters suddenly have more options and rent prices will continue to fall in 2024

Other news

Revenue "Buy now, Pay later" reached a record 16.6 billion USD in the past 2 months, up 14% from 2022.
- 1 in 4 Americans uses this payment method.

Banks borrowed a record 141 billion USD from the Fed's Bank Term Funding Program (BTFP) in the week ending 01/03

Short sellers of US stocks lost a total of 195 billion USD last year. — most of the losses came from short positions in the Magnificent 7 group of stocks.