Editor's Note: Jimmy Zhu is chief strategist at Fullerton Research. The article reflects the author's opinion, and not necessarily the views of CGTN.

U.S. non-farm payrolls added 266,000 jobs last month, most since January this year. Stocks traders cheer on that. However, a more sophisticated market is more skeptical on the headline numbers, as various signs show that this report has been inflated.

U.S. Treasuries market, the battlefield for most of the institutional investors, were not really convinced on what headline numbers told. The two-year and 10-year bonds yield jumped immediately after the jobs report, but both of them quickly gave up most of the earlier rises. Such reaction shows that traders in the bond market don't believe the economic outlook in the largest economy suddenly turns brighter, nor the Fed going to excessively react to this jobs report.

Dollar's performance seems to agree with the bond market. The dollar index just gained 0.3 percent after the jobs report. It still dropped 0.5 percent this week, heading to the biggest weekly declines in six.

Divergence between ISM business employment index & manufacturing jobs added

Historical data shows U.S. jobs' outlook in manufacturing sectors face substantial risk of deterioration in coming months. Earlier this week, ISM manufacturing PMI business employment index dropped to 46.6 from previous reading at 47.7, while the manufacturing sectors added 54,000 jobs last month. Correlation between the U.S. manufacturing jobs added for every month and ISM manufacturing PMI business employment index stood at 0.84 in past 20 years, and this means the trend between these two indicators have been more or less in the same direction.

In past five years, there were two occasions that visible divergence appeared between the ISM manufacturing employment index and monthly manufacturing jobs added.

- From December 2015 to January 2016, ISM manufacturing employment index slid 6.4 points to 44.6, while there were 27,000 manufacturing jobs added in those two months. In the next two months, U.S. lost 40,000 factory jobs

- On October 2018, ISM manufacturing employment index dropped 1.7 points to 56.5, the creations on manufacturing jobs accelerated to 29,0000. However, the pace of the increases decelerated for the entire next five months

GM strike's impact

There is also valid evidence to show why the manufacturing jobs added was inflated. Among all the different sectors in manufacturing industry, those sectors related to automobile gained sharply. Reason behind that is due to returning GM workers after a 40-day strike happened in October. Data shows that transportation equipment sector, including motor vehicles and parts, gained 42,000 jobs last month, after losing exactly 42,000 jobs in October.

Thus, zero jobs were added in the transportation equipment sector in the past two months. If excluding those 42,000 jobs created due to GM strike, the manufacturing sector may have only gained 12,000 jobs for the month of November. This figure at 12,000 is just slightly above the average monthly manufacturing jobs added at 11,000 in past 10 years. Having that said, there is little meaningful improved momentum on hiring in the U.S. manufacturing sectors.

Shrinking profit margin among U.S. manufacturers

U.S. manufacturers' slowing profit is another reason that confirms no hiring momentum picking up at this moment. Producer prices (PPI), a measure of the change in the price of goods when they leave their place of production, have been slowing since middle of last year. The core PPI, excluding food and energy dropped 0.3 percent in October from a month ago, which posted the biggest monthly drop in more than four years.

The PPI measures the wholesale and other business selling costs. The lower prices reflected the softer demand. In such scenario, business owners in manufacturing sectors are not likely to increase their manpower at this stage. A chart below shows that U.S. PPI growth on a year-on-year basis has been moving in tandem with the jobs added in manufacturing sectors.

Gap between the readings for official and private payrolls

Another set of labor market report released by ADP earlier showed that U.S. private sectors only added 67,000 jobs last months. Chart below shows that the gap between U.S. official non-farm payrolls and ADP's jobs report widened to 199,000, highest since 2010. The big gap between the two is another sign that the official's report could be inflated.