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Nonfarm payrolls in the US jumped by 228,000 in November vs a consensus estimate of 195,000 (although the October estimate was revised down to 244,000 from an initial estimate of 261,000). The key number was average hourly earnings, which rose by just 0.2% in November (vs. an estimate of 0.3%), and actually fell by 0.1% in October (original estimate of 0.0%). Year-on-year, average hourly earnings rose just 2.5% (vs. a consensus estimate of 2.7%).

In other words, unit labor costs probably continued to fall in the fourth quarter after a surprise fall during the third quarter. That’s great for US equities, because the long-feared rise in employee compensation just hasn’t turned up. With CPI inflation of 2% year-on-year, real monthly earnings are rising at just 0.5% a year, probably less than the growth in productivity–which means that profits should continue to rise.

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