Market Pros Have High Hopes For Strong Jobs Report Friday
More than 150,000 jobs are expected to have been added in November, mostly in the services sector which is feeling a lift from a more confident consumer.
Economists are forecasting anywhere from 75,000 to more than 200,000 non farm payrolls, and an unchanged employment rate of 9.6 percent when the government releases the November employment report at 8:30 a.m. Friday.
The monthly jobs report comes as economists are beginning to see signs of a pick up, from the steady stream of improving economic data. One key to that has been an improving outlook for the U.S. consumer, traditionally a major economic force that has been severely impacted by the job market, an uncertain economy, falling home prices and tight credit.
Economists' consensus forecast is for 150,000 non farm payrolls in November, compared to October's 151,000 gain.
"We do expect to see a favorable report, a better one than we've seen in a long time," said Dean Maki, chief U.S. economist at Barclay's Capital.
"We are seeing many forms of evidence that growth in general is picking up in the fourth quarter, whether that's the ISM manufacturing survey, the drop in (jobless) claims, and also consumer spending is running along. It looks stronger than in the third quarter, when it was 2.8 percent," said Maki
He expects to see 170,000 jobs in total. That would include the loss of some public sector jobs and private sector payroll growth of 185,000.
Financial markets have been locked in a "recovery trade" ahead of the report. The Dow gained 106 points to 11,362 Thursday, after a stunning 249 point gain Wednesday.
"A large part of the guessing seems to be optimistic.. up 150,000, up 200,000. I think there is the risk of a surprise," said Art Cashin, from the NYSE, where he is director of floor operations at UBS. "Maybe not a black swan, but a stubbed toe."
Just in the past week, there have been a number of indications that the consumer is feeling more confident. For instance, holiday sales are above last year's pace, and November chain store sales rose 6 percent, nearly double what was expected. November auto sales were also stronger than expected and are now running at a 12.3 million annualized sales rate, Maki said.
Maki said the improved auto sales come as banks show signs of easing lending standards on consumer loans. "We're now on track for the strongest quarter for auto sales since the third quarter of 2008," he said.
Economists are expecting some of the businesses that benefit from a stronger consumer are the ones that are adding jobs. "I would say you want to look at manufacturing. You want to look at retail, and you want to look at services, which is to me the most cyclically sensitive," said Stephen Stanley, chief economist at Pierpont Securities.
"My contention for a long time and obviously was premature on this thing, we're going to have really good job growth in 2011," said Stanley. "I wouldn't rule out a 200,000 number either in November or December...I think six months forward I feel pretty comfortable that we're going to achieve 250,000 a month."
Stanley's forecast is for 160,000 non farm payrolls for November.
"I think we're definitely seeing trend improvement. The reason I didn't go with a number significantly higher than last month is because I t thought there were some categories last month that were exaggerating the degree of improvement. We had a positive month for construction last month. I'm a little skeptical of that. We had a big gain of 30,000 in retail. That seemed like a bit much," he said.
Stanley said there has been a pickup in restaurant hiring, and he expects to see more in the November number. The restaurant business is seen as a good indicator for the consumer. "Restaurants added 84,000 over the last three months," he said.
He said the anecdotal comments from retailers, who see consumers purchasing more frivolous items and spending on themselves is meaningful. "I've heard it a lot lately...from retailers talking about people coming out of their cocoon...Up to a month or two ago, it was all about food and all about staples," he said.
Danny Meyer, CEO of the Union Square Hospitality Group, is seeing a similar trend. He said he is hiring across his collection of diverse restaurants in New York City. Business is improving across the board for his group, which includes everything from hamburger to fine dining establishments.
"The thing that's also picking up right now is catering and social entertaining.. not like the extravagant kind .. that type of over the topiness is done, but happily people can realize there's nothing about a recession that feels better because you stay away from your business colleagues, friends and family," he said. Read more about the pickup in the restaurant business.
Some of that catering business is clearly seasonal, and so is some of the hiring that may show up in the November jobs report.
Mark Zandi, chief economist at Moody's Economy.com, said the holiday retail hiring could distort the number though holiday jobs are classified as seasonal. "That's going to be a key wild card. Seasonals are going to be very tricky given what's happened in the last couple of years. We could conceivably get a much stronger number because of seasonals," he said. Zandi also expects a total of 160,000 payrolls, and a private hiring pickup of 180,000.
"All the leading indicators have been taking on a brighter tone in the last few weeks and argue for a stronger number," he said. "...I haven't changed my (GDP) forecast but I am more optimistic."
Other data due Friday includes ISM nonmanufacturing and factory orders, both at 10 a.m.