Labor

While the headline November payrolls print came in almost on top of expectations at 178K, vs consensus of 180K there were two big surprises in today's report, one being the unemployment rate which plunged from 4.9% to 4.6%, well below the 4.9% expected, but the biggest negative surprise was that the Average hourly earnings in November dropped by 0.1%, far below last month's 0.4% rise, and below the 0.2% expected with the annual increase growing by a far more modest 2.5% than the 2.8% expected.

A series of stronger than expected data in recent days pushed Goldman Sachs to up their payrolls growth expectation to 200k (above the 180k expectations), but they note that while the unemployment rate is likely to drop (to 4.8%), average hourly earnings may disappoint. Of course, they add, any non-narrative-confirming misses on the data can likely be explained away by "weather effects and residual seasonality."

We've written several times over the past couple of months about the epic meltdown of the the Dallas Police and Firefighters Pension (DPFP) (see here, here and here for background).  It all started when the Pension Board discovered that one of their real estate managers had been consistently overmarking illiquid real estate investments.  That discovery resulted in an FBI investigation of the manager and a $1BN write down for the DPFP.  In the wake of the writedowns, Dallas policemen and firefighters rushed for the exits and withdrew over $500mm in assets. 

Following October's disappointment (+147k), November's ADP employment printed a much better than expected 216k (over 170k exp), thanks to a notable downward revision to October to 119k. Goods-producing jobs dropped once again (-11k) with a renewed surge in services employment (+228k). While this November post-Trump spike is noteworthy (highest in 5 months), there continues to be a medium-term trend of weakening job growth in America.

A good post-trump spike, but the 24-month trend continues to deteriorate:

Spot the odd one out...

In just a couple of months, the largest pension fund in the United States, the California Public Employees' Retirement System (CalPERS), will have to decide whether they'll rely on sound financial judgement and math to set their rate of return expectations going forward or whether they'll cave to political pressure to maintain artificially high return hurdles that they'll never meet but help to maintain their ponzi scheme a little longer.  The decision faced by CALPERS is whether their long-term assumed rate of return on assets should be lowered from the cu