November US jobs report comes up big. Do we buy it?

I didn't get a chance to comment on Friday's strong US jobs report for November, because my wife and I were in Milwaukee for someone's birthday event instead.

That was as big a dunk as I can remember seeing in person, and the Bucks destroyed a Clippers team that some think is going to be in the NBA Finals. And while I still think there were better ways Milwaukee could have been helped beyond tax dollars for a new arena and entertainment district (in the QCEW released this week, Milwaukee County lost nearly 2,000 jobs between June 2018 and June 2019), it's a pretty sweet setup.

Speaking of jobs, let me go over that shockingly big US jobs report for November.

Total nonfarm payroll employment rose by 266,000 in November. Job growth has averaged 180,000 per month thus far in 2019, compared with an average monthly gain of 223,000 in 2018. In November, notable job gains occurred in health care and in professional and technical services. Employment also increased in manufacturing, reflecting the return of workers from a strike. Employment continued to trend up in leisure and hospitality, transportation and warehousing, and financial activities, while mining lost jobs....

In November, average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents to $28.29. Over the last 12 months, average hourly earnings have increased by 3.1 percent. In November, average hourly earnings of private-sector production and nonsupervisory employees rose by 7 cents to $23.83. (See tables B-3 and B-8.)

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours in November. In manufacturing, the average workweek increased by 0.1 hour to 40.5 hours, while overtime decreased by 0.1 hour to 3.1 hours. The average workweek of private-sector production and nonsupervisory employees held at 33.5 hours. (See tables B-2 and B-7.)

The change in total nonfarm payroll employment for September was revised up by 13,000 from +180,000 to +193,000, and the change for October was revised up by 28,000 from +128,000 to +156,000. With these revisions, employment gains in September and October combined were 41,000 more than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.) After revisions, job gains have averaged 205,000 over the last 3 months.

That's a whole lot more than the 67,000 private sector jobs that ADP said was added for November, and sure doesn't sound like an economy that is maxed out with declining growth. As UW's Menzie Chinn points out, this is a noted reversal from the ADP reports earlier in the year, which was claiming stronger growth than the numbers coming out from the Bureau of Labor Statistics.

It lends the question - do we believe the blowout November numbers from the BLS?

I'm going to be skeptical for now. As that chart of Prof. Chinn's hints at, the totals in March 2019 were already overstated, and is slated to be revised down by 501,000 jobs when totals are benchmarked in early 2020. And in looking at the recently released QCEW for June 2019, that 501,000-job gap is set to grow larger.

US jobs growth, June 2018-June 2019
Total jobs
Monthly report +2.245 million
QCEW report +1.666 million (-579,000)

Private jobs
Monthly report +2.169 million
QCEW report +1.570 million (-599,000)

I'm not necessarily saying this is being done intentionally via pressure from the Trump Administration (you can, I won't), but if we assume that jobs are still being overstated by 50,000 a month, then that November number becomes 216,000 jobs and the average growth over the last 3 months becomes 155,000. Still pretty good, but would be more in line with an economy at full employment near the top of an expansion cycle.

Hey, maybe I'm wrong. Maybe the softening of the economy that we saw through October has turned around in November, and the Bubbly stock market is a leading indicator of good times returning. But unless we see a major increase in tax revenues and wage growth (which is stuck at 3.1% year-over-year for all jobs, with manufacturing under 2.7% and construction under 2.0%), I'm not going to believe things are anything but moderate-to-slow growth.

And I'll wait for the new benchmarks for the entire year to be reported along with the January 2020 report, which will hit in the first week of February. Because if recent experience is any indicator, I bet the massive jobs numbers reported for November will merely become "good", and other months might not be very good at all.