Economy

Nonfarm payrolls rose by a seasonally adjusted 199,000 in November, slightly better than the 190,000 Dow Jones estimate and ahead of the October gain of 150,000.
The unemployment rate declined to 3.7%, compared with the forecast for 3.9%, as the labor force participation rate edged higher.
Average hourly earnings, a key inflation indicator, increased by 0.4% for the month and 4% from a year ago, close to expectations.
Health care was the biggest growth industry, adding 77,000. Other big gainers included government (49,000), manufacturing (28,000), and leisure and hospitality (40,000).

Job creation showed little signs of a letup in November, as payrolls grew even faster than expected and the unemployment rate fell despite signs of a weakening economy.
Nonfarm payrolls rose by a seasonally adjusted 199,000 for the month, slightly better than the 190,000 Dow Jones estimate and ahead of the unrevised October gain of 150,000, the Labor Department reported Friday. The numbers were boosted by sizeable gains in government hiring as well as workers returning from strikes in the auto and entertainment industries.

The unemployment rate declined to 3.7%, compared with the forecast for 3.9%, as the labor force participation rate edged higher to 62.8%. A more encompassing unemployment rate that includes discouraged workers and those holding part-time positions for economic reasons fell to 7%, a decline of 0.2 percentage point.
“The job market continues to be resilient after a year of dodging recession fears,” said Daniel Zhao, lead economist at job ratings site Glassdoor. “Really the one concern that we had coming in today’s report was the recent rise in the unemployment rate. So the improvement in unemployment was a welcome relief.”

The department’s survey of households, used to calculate the unemployment rate, showed much more robust job growth of 747,000 and an addition of 532,000 workers to the labor force.
Average hourly earnings, a key inflation indicator, increased by 0.4% for the month and 4% from a year ago. The monthly increase was slightly ahead of the 0.3% estimate, but the yearly rate was in line.
Markets showed mixed reaction to the report, with stock market futures modestly negative while Treasury yields surged.

“What we wanted was a strong but moderating labor market, and that’s what we saw in the November report,” said Robert Frick, corporate economist with Navy Federal Credit Union, noting “healthy job growth, lower unemployment, and decent wage increases. All this points to the labor market reaching a natural equilibrium around 150,000 jobs [per month] next year, which is plenty to continue the expansion, and not enough to trigger a Fed rate hike.”

Health care was the biggest growth industry, adding 77,000 jobs. Other big gainers included government (49,000), manufacturing (28,000), and leisure and hospitality (40,000).
Heading into the holiday season, retail lost 38,000 jobs, half of which came from department stores. Transportation and warehousing also showed a decline of 5,000.
Duration of unemployment fell sharply, dropping to an average 19.4 weeks, the lowest level since February.
The report comes at a critical time for the U.S. economy.
Though growth defied widespread expectations for a recession this year, most economists expect a sharp slowdown in the fourth quarter and tepid gains in 2024. Gross domestic product is on pace to rise at just a 1.2% annualized pace in the fourth quarter, according to an Atlanta Fed data gauge, and most economists expect growth of around 1% in 2024.

Federal Reserve officials are watching the jobs numbers closely as they continue to try to bring down inflation that had been running at a four-decade high but has shown signs of easing.
Futures markets pricing strongly points to the Fed halting its rate-hiking campaign and beginning to cut next year, though central bank officials have been more circumspect about what lies ahead. Pricing had been pointing to the first reduction happening in March, though that swung following the jobs report, pushing a higher probability for the first expected cut now to May.
The Fed will hold its two-day policy meeting next week, its last of the year, and investors will be looking for clues about how officials view the economy.
Policymakers have been aiming to bring the economy in for a soft landing that likely would feature modest growth, a sustainable pace of wage increases and inflation at least receding back to the Fed’s 2% target.
Consumers hold the key to the U.S. economy, and by most measures they’ve held up fairly well.
Retail sales fell 0.1% in October but were still up 2.5% from the previous year. The numbers are not adjusted for inflation, so they indicate that consumers at least have nearly kept pace with higher prices. A gauge the Fed uses showed inflation running at a 3.5% annual rate in October, excluding food and energy prices.
However, there is some worry that the end of Covid-era stimulus payments and the continued pressure from higher interest rates could eat into spending.
Net household wealth fell by about $1.3 trillion in the third quarter to about $151 trillion, owing largely to declines in the stock market, according to Fed data released this week. Household debt rose 2.5%, close to the pace where it has been for the past several quarters.
Fed officials have been watching wage data closely. Rising prices tend to feed into wages, potentially creating a spiral that can be difficult to control.
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The U.S. job market once again surprised to the upside in November, as strong growth in health care and a few other sectors helped the economy add nearly 200,000 jobs and push the unemployment rate down.
Health care and social assistance added more than 93,000 jobs for the month, making it the top category for job growth, according to the U.S. Bureau of Labor Statistics. Government jobs grew by 49,000, while leisure and hospitality added 40,000 jobs.

The job gains for health care and social assistance rise to 99,000 when including private education, as some economists do.
Much of the labor market story over the past two years has been tied to the economic rebound from the Covid-19 pandemic, but the health-care growth appears to be part of a longer-term trend.
“We’re back to 2019 in some ways. If prior to the pandemic, you would have said, ‘Hey, health care’s going to be one of the largest sources of hiring in late 2023,’ no one would have been surprised by that, I think. There are very long-term structural tailwinds here,” Nick Bunker, director of economic research at Indeed Hiring Lab, told CNBC.
Bunker also pointed out that health care is less sensitive to higher interest rates or other cyclical factors that affect the U.S. labor market.
Another key part of the jobs growth story in November was returning strike workers.

Manufacturing employment rose by 28,000, helped by the 30,000 jobs gained in motor vehicles and parts as the United Auto Workers strike ended. The information sector was also bolstered by the addition of 17,000 jobs from the motion picture and sound recording industries, as Hollywood production restarts after the actors’ strike was resolved.
Retail trade was an outlier area to the downside, losing more than 38,000 jobs. The sector is roughly flat year over year in terms of total jobs, according to the Labor Department.
“I’m not spooked by it right now. … If you look at the nonseasonally adjusted gains for that sector, it’s roughly in line with what we saw last year. So maybe the seasonal adjustments need to catch up or change. I think we’ve seen this with a variety of data,” Bunker said.Don’t miss these stories from CNBC PRO: More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Rising US-China tensions are putting pressure on Apple to diversify its manufacturing base. Finding suitable options has not been easy. But Vietnam now looks set to play a bigger role. Apple is reportedly moving iPad product development resources to the south-east Asian nation for the first time.Scrutiny of Apple’s dependence on China, where it makes about 90 per cent of its products, intensified last year in a row over Chinese factory workers’ protests over lockdowns. Since then, suppliers have placed their bets on Mexico, Malaysia, Thailand, Indonesia, Vietnam and India to become alternatives to China. Apple has moved some of its iPhone production entry-level models and lower price products such as AirPods outside of China. But no one country seemed to be the right fit. Now, there is more clarity. Apple is working with China’s BYD, a key iPad assembler, to move the resources needed to design and develop new products to Vietnam. Companies that invested in production facilities in Vietnam are set to have an edge if that shift accelerates. Chinese supplier Luxshare has been investing in Vietnam since 2019. Taiwanese suppliers Quanta Computer and Compal Electronics also gained a head start. Their shares are up more than 30 per cent this year.Vietnam’s attractions include a monthly minimum wage that is low at about $190. Labour force participation is high, exceeding 75 per cent of the working-age population. Vietnam’s proximity to China, with which it shares a terrestrial border, makes for efficient supply chain logistics. Apple is likely to remain dependent on manufacturing in China for a long time. That is a consequence of the deeply entrenched supplier ecosystem and the need for scale for large volume products such as phones and accessories. But analysts expect as much as 30 per cent of production capacity to shift from China to south-east Asia over the next two years. Early bets will pay off. Our popular newsletter for premium subscribers is published twice weekly. On Wednesday we analyse a hot topic from a world financial centre. On Friday we dissect the week’s big themes. Please sign up here. More

BofA’s weekly ‘Flow Show’ showed equity funds saw $6.2 billion of inflows, led by U.S. equity funds, which saw $5.5 billion of inflows.Japanese equity funds saw outflows of $500 million, the fifth straight week, as markets bet that the Bank of Japan’s ultra-loose monetary policy could be close to an end. The yen has strengthened over 1.5% against the dollar in the latest week, while Japan’s main stock index, the Nikkei 225 has fallen almost 3.5%. Bank of America’s bull and bear indicator, a measure of investor sentiment, rose to 3.8 from 2.7. This was the indicator’s biggest weekly jumps since February 2012, driven by the biggest six-week high yield bond inflow since August 2020 and high emerging market stock inflows. “Bear sentiment flipping to speculative animal spirits,” BofA strategists said. “Sentiment no longer contrarian positive for risk assets.” More

1. November nonfarm payrolls aheadThe spotlight on Friday is squarely on the latest U.S. employment report, with investors hoping that the data will provide some clues into the Federal Reserve’s upcoming monetary policy decisions.Economists estimate that the U.S. added 180,000 roles in November, increasing slightly from 150,000 in the prior month. Average hourly earnings, a key gauge of wage growth, are seen rising at a monthly pace of 0.3% versus October, accelerating marginally from a previous reading of 0.2%. The unemployment rate in the world’s largest economy, meanwhile, is expected to come in at 3.9%, matching October’s level.The figures will cap off a week of data releases which have indicated that an unprecedented series of interest rate hikes by the Fed may be working to soften labor demand. Job openings touched an over 2-1/2-year low and fewer workers resigned from their positions in October, while private employers added less roles than anticipated last month.Cooling the labor market has been a major focus of the Fed’s move to lift borrowing costs to their highest mark in more than two decades. In theory, a slowdown in demand for workers could alleviate some upward pressure on wages and, by extension, help achieve the Fed’s ultimate objective: defusing elevated inflation.2. U.S. futures turn lowerU.S. stock futures turned lower on Friday, as investors remained cautious as they awaited the November nonfarm payrolls report.By 07:28 ET (12:28 GMT), the Dow futures contract had dipped by 0.1%, S&P 500 futures had fallen by 0.2%, and Nasdaq 100 Futures had declined by 0.3%.Equities on Wall Street climbed in the prior session, as traders digested a series of labor market figures this week. The benchmark S&P 500 and 30-stock Dow Jones Industrial Average rose by 0.8% and 0.2%, respectively, breaking three-day losing streaks. The tech-heavy Nasdaq Composite surged by 1.4%.Despite Thursday’s gains, both the S&P and Dow are on pace to post weekly declines. However, the Nasdaq’s jump brought it back into positive territory for the week.3. Apple pushing to make a quarter of its iPhones in India – WSJApple and its suppliers are aiming to build over 50 million iPhones in India in the next two to three years, and have planned to construct tens of millions of additional units after that, according to a report in the Wall Street Journal.Citing people involved in the matter, the paper noted that, if the plans are achieved, India would ultimately make up a quarter of global iPhone output and be in a position to take further market share later in the decade.China would remain the world’s biggest producer of Apple’s ubiquitous device, the WSJ said. But with ties strained between the U.S. and Beijing, the tech giant has considered shifting some of its supply chain outside of China.California-based Apple and its suppliers widely believe that an initial push into India has gone well despite challenges posed by the country’s local infrastructure and restrictive labor regulations, the people told the WSJ.4. RBI leaves rates at 6.5%The Reserve Bank of India kept interest rates on hold as expected on Friday, stating that tight policy has helped bring down inflation over the past year.In its final meeting of 2023, the RBI left its policy repo rate at 6.5%, after having signaled a pause in its monetary tightening cycle earlier this year.However, Governor Shaktikanta Das warned that elevated food costs could still surprise to the upside in the coming months, adding that the central bank continued to remain watchful of any potential increases.While Indian inflation eased for most of 2023, a delayed monsoon season triggered food shortages, which factored into an uptick in prices for some grains and vegetables.5. Oil jumps with U.S. employment data in focusOil prices rose from a near six-month low on Friday, with markets awaiting more cues on the U.S. economy from the nonfarm payrolls data.While indications of a cooling labor market could diminish the prospect of higher interest rates, they may also point to a softer American economy, which could dent oil demand in the world’s largest crude consumer.At 04:50 ET, Brent oil futures expiring in February had gained 2.3% to $75.73 a barrel, while West Texas Intermediate crude futures climbed 2.2% to $71.15 per barrel.Prices gained some support after Saudi Arabia and Russia called on fellow members of the Organization of the Petroleum Exporting Countries and its allies — a group known as OPEC+ — to adhere to an agreement on output cuts made last week. Markets were initially underwhelmed with the voluntary nature of the reductions.But both contracts remain on track to end lower for a seventh consecutive week, as markets fret over high U.S. supplies and weak oil import figures from China.Upgrade your investing with our groundbreaking, AI-powered InvestingPro+ stock picks. Use coupon code PROPLUSBIYEARLY to get a limited time discount on our Bi-Yearly subscription plan. Click here to find out more, and don’t forget to use the discount code when checking out. More

MOSCOW (Reuters) – Russia’s success in evading a Western oil price cap is helping drive a recovery in economic growth as President Vladimir Putin prepares to run for re-election, despite the problems caused by labour shortages, inflation and high interest rates.Russia’s parliament has formally set next year’s presidential election date for March 17. Putin, who on Thursday said the economy was set to grow 3.5% this year, on Friday said he would run again, a move that could keep him in power until at least 2030.Russia’s export-focused, $2.2-trillion economy has ridden the sanctions wave better than either Moscow or the West anticipated when those opposed to the February 2022 invasion of Ukraine sought to punish and isolate Putin’s Russia. Crucially, the West has been unable to effectively curb Russia’s oil revenues. Russia has redirected exports to destinations such as China and India and used the opaque ownership of so-called shadow fleets of ships to circumvent the West’s oil price cap.In November, energy revenues contributed 961.7 billion roubles ($10.41 billion) to Russia’s budget, compared with just 425.5 billion in January. With oil revenues recovering, Putin’s key domestic challenge will be grappling with a stark labour shortage, aggravated by last year’s military mobilisation and the emigration of hundreds of thousands of people since Russia invaded Ukraine.Other economic issues, such as the weak rouble, high inflation and interest rates risk squeezing households’ purchasing power, a particularly sensitive topic as the country goes to the polls.SKILLED WORKER SHORTAGEWith unemployment at a record low 2.9% and Moscow throwing fiscal resources at the defence sector through increased military production, other sectors like IT are short on staff, hampering productivity. Russia needs more skilled workers, managers and high-quality engineers to reach the desired level of technological sovereignty in manufacturing industries, Putin’s economic adviser Maxim Oreshkin said in November. “For people to come here more willingly, we need attractive salaries,” Oreshkin said. Short-term sanctions shocks have been overcome, Oreshkin said, but pressure from the West will only increase and the whole economy must work on transitioning to Russian technology platforms. Workforce capacity has reached historically high levels, said Dmitry Kulikov, director at the ACRA ratings agency. “This means that economic growth will be constrained on the supply side, as a result of which annual GDP growth rates will fall from around 3% in 2023 to closer to the potential 1-2%,” Kulikov said. Significant wage jumps in manufacturing and the military, as well as fiscal support for families affected by the war and mobilisation, are driving an increase in salaries. After a contraction in 2022, real incomes are set to recover sharply this year, but unevenly across sectors and regions, forcing many families to cut back, especially on imported goods. As Russia’s economy rebounds from a 2.1% contraction in 2022, the key question will be how the economy copes with overheating, with supply-side constraints likely to curb growth, said Liam Peach, senior emerging markets economist at Capital Economics.”Households have experienced a big rise in their incomes, but I don’t think it’s sustainable,” said Peach. “Higher inflation means a bigger squeeze on household incomes ahead of the election.”INFLATION PRESSURE? Keeping a lid on inflation is the central bank’s job. Already forced into 750 basis points of monetary tightening since July, the bank is widely expected to hike again, to 16%, on Dec. 15. Following double-digit inflation in 2022, inflation this year is seen at around 7.5%, still well above the bank’s 4% target. “It’s plausible that inflation gets as high as 10% next year because the economy is growing quickly,” said Peach, pointing to wage pressure and unanchored household inflation expectations. But ultimately, the inflation situation is manageable for now, especially with a population that has become accustomed to regular price rises, however painful. The central bank will of course talk cautiously about inflation, said Elina Ribakova, senior fellow at the Peterson Institute for International Economics and the Kyiv School of Economics (KSE). But the development of a serious inflation spiral would require greater fiscal pressure, uncontrolled rouble depreciation and the central bank being behind the curve, she added. “They are nowhere near that, they are just not feeling the pressure,” Ribakova said. Authorities responded with rate hikes and capital controls to the rouble’s tumble past 100 to the dollar this year and sharp volatility is always a risk. It traded at 92.76 on Thursday.While a relatively weak rouble is factored into Russia’s budget plans and boosts state coffers through foreign currency export revenues, it pushes up import costs, fans inflation and risks capital flight. OIL PRICE COMFORTOil prices, the lifeblood of Russia’s economy, are currently well above what Russia needs for fiscal security, even if they slid to five-month lows this week. A series of output cuts by OPEC+ countries and the widespread circumvention of the West’s price cap are combining to boost Russia’s energy revenues.”Fundamentally, the price cap’s leverage is increasingly under threat,” KSE Institute said in its November review, referring to the West’s $60 a barrel cap. “In October, more than 99% of seaborne exports of Russian crude oil appear to have been sold above $60/barrel.” The West’s sanctions, designed to cut Moscow’s key source of financing, put immense strain on Russia’s budget deficit early this year, but Moscow now expects a deficit of around just 1% of GDP. “If the oil price stays at the current level, it is extraordinarily comfortable for Russia,” said Ribakova.($1 = 92.3955 roubles) More