Jobs top expectations; Fed still expected to cut 25 bps
2min read The November jobs report from the Bureau of Labor Statistics showed stronger-than-expected labor market performance, with total nonfarm payroll employment rising by 227,000 compared to consensus estimates of 200,000. The unemployment rate ticked up slightly to 4.2% from 4.1% in October, reflecting some softening but remaining historically low. Average hourly earnings grew by 0.4% month-over-month and 4.0% year-over-year, signaling steady wage gains without major inflationary pressure. The labor force participation rate held steady at 62.5%, unchanged from its recent range.
Several industries posted notable job growth. Health care added 54,000 positions, driven by gains in ambulatory services, hospitals, and nursing care facilities. Leisure and hospitality continued its recovery, adding 53,000 jobs, particularly in food services and drinking establishments. Government employment increased by 33,000, while transportation equipment manufacturing saw a jump of 32,000, attributed to the return of striking workers. However, retail trade lost 28,000 positions, with declines concentrated in general merchandise retailers.
Revisions to prior months’ data painted a more optimistic picture of recent hiring trends. September’s payroll growth was revised up by 32,000 to 255,000, while October’s figure rose by 24,000 to 36,000. Together, these adjustments added 56,000 jobs to previously reported totals, underscoring the resilience of the labor market despite macroeconomic uncertainties.
Bond markets reacted to the report with a decline in yields. The 10-year Treasury yield fell to 4.13%, its lowest level since late October, while the 2-year yield dropped to 4.10%. This reflected expectations that the stronger-than-expected jobs data, while robust, was unlikely to derail a December rate cut by the Federal Reserve. CME Fed Funds futures indicated a 90% probability of a rate cut later this month, consistent with market sentiment prior to the report.
Stock market futures turned positive after the release, with S&P 500, Dow, and Nasdaq futures each gaining 0.1-0.2%, while the Russell 2000 advanced by 0.7%. Investors appeared encouraged by the combination of solid job growth and the likelihood of continued monetary easing. The report supported ongoing optimism in equity markets without raising fears of excessive labor market tightness that might force the Fed to adopt a more hawkish stance.
The broader market context shows a delicate balance between growth and disinflation, with sectors like health care and leisure leading gains while retail struggles. This dynamic, coupled with a relatively sanguine wage growth environment, supports a favorable backdrop for equities, particularly in cyclical and small-cap names. However, risks remain as markets brace for upcoming CPI data and potential geopolitical or policy shifts.
Looking ahead, the labor market’s resilience aligns with a generally positive macroeconomic setup but leaves open questions about how much further momentum can sustain without significant wage inflation or external shocks. Investors will continue to watch for any signals from the Federal Reserve, particularly in its December meeting, to gauge the policy path in 2024.
