What the November Jobs Report Means for "Dectaper"

Good news is actually good news on Wall Street today.

Stocks rallied Friday following a robust November jobs report that showed U.S. employers continued to add jobs at a steady pace last month, which pulled the unemployment rate down to a five-year low at 7.0%.

Stocks' strong gains came as a surprise to many as Friday's report hints that the Federal Reserve's Dec. 17-18 meeting could actually bring serious "Dectaper" talk.

The November report "gives the Fed all the evidence it needs to begin tapering this month," Paul Ashworth of Capital Economics told USA Today.

Indeed, no matter how you look at it, the Labor Department data was the best in months.

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Key Takeaways From the November Jobs Report

Here are the jobs report highlights:

  • U.S. payrolls rose by 203,000, handily beating the consensus estimate of 180,000.
  • The unemployment rate fell from 7.3% to 7.0%, a level not seen since 2008. The forecast was for a modest dip to 7.2%.
  • Gains were seen across all sectors. Leading were education and health services with 40,000 new hires. Professional and business services followed with the addition of 35,000 new employees. Transportation and warehousing hired 30,000. Retail added 22,000 jobs. Construction companies took on 17,000. State and local government increased payrolls by 14,000. And the closely watched manufacturing sector (a bellwether for the broader economy) boosted headcount by 27,000.
  • The overall labor participation rate rose 0.2% to 63%, reversing several months of declines.
  • The average week rose from 34.3 hours to 34.5 hours. Employers typically give existing workers additional hours before adding new hires.
  • Average hourly earnings increased $0.04 to $24.15.
  • Temporary employee staff rose by 16,000, an encouraging sign due to the fact that companies tend to bring on contingent workers before increasing permanent headcount.
  • The underemployment rate (which includes part-time employees who want full-time jobs, discouraged job seekers who have given up looking for work, and the unemployed) dipped to 13.2% from 13.8%.

On to the Fed QE Taper...

The solid November jobs figures came on the heels of a string of encouraging economic data that also stoked chatter of a U.S. Federal Reserve QE taper.

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Thursday's report on jobless claims showed the number of Americans applying for unemployment benefits dropped 23,000 last week to 298,000. That was a near six-year low and a sign companies are laying off fewer workers. Applications have fallen in seven of the past eight weeks.

Also on Thursday, the Commerce Department said gross domestic product expanded at an annualized 3.6% in Q3, up from its previously reported 2.8%.

And, Monday's Institute for Supply Management report showed U.S. factory activity hit a 2 1/2 year high in November.

All suggests a QE taper is more likely sooner rather than later. While there is some speculation a taper could come in December, most analysts believe the central bank will hold off until 2014.

Waiting until at least January gives the Fed more time to confirm that mounting economic optimism is warranted, more time to firm up its bond-buying exit strategy, and more time to prepare markets for a Fed exit.

Plus, Fed Chairman Ben Bernanke will be finished his term in January, and Janet Yellen will take over.

Even with taper talk heating up, we know Yellen is a fan of the printing press, much like Bernanke. She may favor more time before the QE taper...although this is what she should do as soon as she gets into office...

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