Strong job gains and wage growth spur expectations for a Federal Reserve rate cut in December
The United States saw nonfarm payrolls increase by 227,000 in November, marking a recovery from October’s upwardly revised figure of 36,000, according to the Bureau of Labor Statistics (BLS) report released Friday.
According to CNBC, the figure exceeded the Dow Jones estimate of 214,000 and included an upward revision of September’s job gains to 255,000, reflecting a 32,000-job increase from earlier estimates.
October’s job creation was significantly impacted by Hurricane Milton and a major Boeing strike, which slowed hiring.
Despite November’s rebound, the unemployment rate rose to 4.2 percent, aligning with expectations.
The increase was accompanied by a 0.1 percentage point decline in the labour force participation rate, which fell to 62.5 percent as the labour force contracted by 193,000.
A broader unemployment measure, which accounts for discouraged workers and part-time employees seeking full-time work, edged higher to 7.8 percent.
Health care led job gains with 54,000 positions added, followed by leisure and hospitality, which increased by 53,000. The government sector contributed 33,000 jobs, while social assistance accounted for 19,000 new positions.
However, retail trade lost 28,000 jobs ahead of the holiday season. Analysts noted that the later-than-usual Thanksgiving holiday may have delayed hiring in some stores.
Wages continued to rise in November, with average hourly earnings increasing by 0.4 percent from October and by 4 percent year-over-year.
Both figures exceeded forecasts by 0.1 percentage point. Stock market futures rose after the report, while Treasury yields declined.
The strong payroll data heightened market expectations for a Federal Reserve interest rate cut. Traders now see an 88 percent chance of a quarter-point reduction when policymakers meet on December 18.
“The economy continues to produce a healthy amount of job and income gains, but a further increase in the unemployment rate tempers some of the shine in the labour market and gives the Fed what it needs to cut rates in December,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management.
The household survey, which calculates the unemployment rate, presented a more concerning picture. Employment in households fell by 355,000 in November, with full-time jobs declining by 111,000 and part-time employment dropping by 268,000.
The unemployment rate for Black workers rose significantly to 6.4 percent, a 0.7 percentage point increase.
The Federal Reserve faces a delicate balance as it evaluates the mixed signals from the US labour market. Recent inflation trends show a gradual increase in prices, though they remain well below the 40-year highs seen in mid-2022.
Lindsay Rosner, head of multi-service investing at Goldman Sachs Asset Management, described the report as “a Thanksgiving buffet with payrolls spot on, revisions positive, but unemployment ticking higher despite the participation rate falling.”
She added, “This print doesn’t kill the holiday spirit, and the Fed remains on track to deliver a cut in December.”
Earlier in the week, Federal Reserve Chair Jerome Powell emphasised that the overall strength of the US economy allows policymakers to approach interest rate decisions cautiously.
Other Fed officials signalled a willingness to adjust rates further, depending on economic data.
