America Leads World in Job Growth
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The United States added 321,000 jobs in November as job growth continued to accelerate, marking 2014 as the best year for jobs since 1999.
The United States added over 2.5 million jobs in 2014, while a number of secondary indicators point to improvements in the American labor market. The unemployment rate has fallen steadily in 2014, reaching 5.8% in November, unchanged from the prior month.
Labor force participation, while historically at low rates, has begun to stabilize. It remained at 62.8% in November, the lowest rate since the 1970s.
The United States added 321,000 jobs in November as job growth continued to accelerate, marking 2014 as the best year for jobs since 1999.
The United States added over 2.5 million jobs in 2014, while a number of secondary indicators point to improvements in the American labor market. The unemployment rate has fallen steadily in 2014, reaching 5.8% in November, unchanged from the prior month.
Labor force participation, while historically at low rates, has begun to stabilize. It remained at 62.8% in November, the lowest rate since the 1970s.
Both hiring and quit rates have risen sharply in 2014, with both accelerating in recent months. These rates are key indicators for churn in the labor market, a key leading indicator of future growth. Hiring rates, which have risen to over 3.5% of total employment, indicate future demand expectations for companies. The quit rate, on the other hand, indicates worker confidence in the ease of finding a new job.
Strength in Private Employment
According to the Bureau of Labor Statistics, the strongest growth is in private payrolls, which rose 314,000 month-over-month, rising to 2.1 million above the previous peak and up nearly 11 million from its lowest point in 2009.
Meanwhile, voluntary part-time work rose 235,000 and involuntary part-time work fell 177,000. Economists see the decline in involuntary work as significant, because it indicates workers are finding it easier to gain full employment if they want it.
Average weekly hours rose 0.1 hours to 34.6 in November, while average hourly earnings of non-supervisory workers rose 4 cents to $20.74 per hour.
Market Response
Investors cheered the news with an early rally in stocks that moderated towards the end of trading on Friday. The Dow Jones rose 0.33% while the S&P 500 rose 0.17%. Significantly, the higher risk NASDAQ rose 0.24% and the Russell 2000, which tracks small-cap stocks, rose 0.8%.
The outperformance in small caps reverses a year-to-date underperformance, although the Russell 2000 is still up only 1.62% year-to-date, while the S&P 500 was up year-to-date 12.27% at the end of trading last week.
In times when investors have a higher appetite for risk, the Russell 2000 outperforms the S&P 500. Its underperformance has suggested that the market sees greater uncertainty in the American economy, but that view may be changing in light of the strong growth in jobs.
The best performers were financial stocks, with the sector rallying 1.8%. In a private note to clients earlier this month, Goldman Sachs said financial services may get a boost from an interest rate hike from the Federal Reserve, but such a hike is unlikely unless the labor market improves. However, a rising interest rate environment would have an uncertain impact on other sectors, as better bond yields could encourage investors to sell stocks and purchase lower-risk Treasuries.
