This morning, December's non-farm payrolls came in ahead of plan, but the report was mixed, as wages were disappointing. December's NFP came in at 252,000, the unemployment rate fell to 5.6% and the job growth was broad-based, led by professional/business services, construction, health care, food and retail. Jobs were revised higher by 50,000 for October and November -- including the amazing November report, which now was recalibrated at 353,000 jobs vs. the prior 321,000 report. In calendar 2014, 2.9 million jobs were created -- the best since 1999.
All of these figures are very encouraging. However, the wage figures are the clear offset -- December's average hourly earnings fell 0.2% and November's 0.4% initial growth reading was revised lower to 0.2%. In the past year, annualized wages grew just 1.7%. What's disappointing is that the initial read in the November was encouraging, as it showed that wages were perhaps beginning an upswing. Unfortunately for consumers, that isn't the case.
Now, we've always said that the NFP report and its components are largely rear view data points, and we are hopeful that wages will eventually follow the job gains -- but for now, we're not seeing it.
Putting it all together, this report likely means the Fed doesn't raise interest rates for a while. Wages are a big factor in their determination on policy and with no improvement on this front, they have the flexibility to wait and, of course, they remain data dependent. Lower interest rates, lower oil and natural gas costs, and mid-single digit growth in GDP are all positives for earnings and stocks.
Earlier this week we reduced our interest rate related financial exposure -- we sold Bank of America (BAC) and AIG (AIG) and reduced SunTrust (STI) -- and we've been taking gains in some of the industrials as well -- profit taking in United Technologies (UTX), right-sized Eaton (ETN).
We continue to like the consumer stocks -- discretionary and staples like Lululemon (LULU), Dollar General (DG), Panera (PNRA, Walgreens (WBA), Unilever (UN) ¿ technology like Red Hat (RHT), Microsoft (MSFT). We bought 100 more shares of RHT, and are looking to add in this sector when we can. We also like consumer-related financials such as credit cards ¿ MasterCard (MA), American Express (AXP).
And finally, we are looking to add to health care -- Merck (MRK), AbbVie, and possibly Cigna (CI) are on our short list.