The headline figure of November NFP - employment gains – came much weaker than expected. However, details of the report were positive for the markets. The labor force continues to slowly return to jobs and the outstripping growth of vacancies restrains the growth of employment. This works as a major constraint for economic growth and drives up costs in the form of higher wages that will eventually fall back on consumers, which increasingly worries the Fed.

Job growth in the United States fell short of expectations by almost half, amounting to 210 thousand. The previous figure was revised to 82 thousand, but the impact on market expectations was small. The number of jobs in manufacturing increased by 60 thousand, but the service sector greatly slowed down the growth of jobs - only 175 thousand. The leisure and hospitality sector struggle to recover, but the manufacturing sector has added a solid 60,000 jobs. Employment is closing the gap from the pre-covid level, but it is still far from the norm - 3.9 million jobs.

The main problem for the US labor market now, which, paradoxically, increasingly requires tightening monetary policy, is a significant outweighing of demand over supply. The NFIB reports about 10 million job openings, and a net 48% of small businesses report they cannot find workers. The labor force participation rate is recovering poorly and is now at 61.8%. The US is now facing unprecedented inflationary wage pressures: according to the same NFIB, 44% of firms have raised wages in the past three months to attract workers. Net 32% of businesses said they intend to raise salaries over the next three months. These two indicators are at their maximum since the beginning of the information collection period, i.e., since 1975:

One of the reasons why employment is growing slowly is the increase in household wealth by $26 trillion between 2019 and June 2021. This is almost $78 thousand for every American which explains low incentive to find a work, a good savings buffer has been accumulated.

The latest comments from Fed officials clearly show that the central bank will accelerate the pace of QE tapering as the threat of inflation grows. This is happening against the background of the threat of the spread of the new covid strain, that is, the risks of economic growth are beginning to combine with monetary policy that is less and less friendly for the markets, which sharply limits the possibilities of a rally in stock indices. Long-term Treasuries are beginning to price in this scenario as investors buy up securities anticipating lower near-term returns, so the yield on bonds is rapidly declining and is now at its lowest since September: