November Jobs Preview: What should markets expect?

The November jobs report is scheduled to be released by the Bureau of Labor Statistics at 8:30 a.m. ET on Friday. Economists are forecasting a significant rebound from October's dismal 12,000 job gain, which was heavily impacted by hurricanes and labor strikes. The consensus estimate is for 200,000 new jobs, with some analysts projecting as high as 275,000. The unemployment rate is expected to tick up slightly to 4.2% from 4.1%, reflecting an influx of sidelined workers re-entering the labor force.

Revisions to October's data could play a crucial role in shaping the overall narrative. October's job creation was likely underreported due to an unusually low response rate of 47.4% for the establishment survey. Adjustments could add tens of thousands of jobs to the October figure, providing more clarity about the labor market's underlying health. Analysts have also noted that disruptions from strikes and weather could have skewed the data significantly.

Average hourly earnings are projected to increase by 0.3% month-over-month, slowing from October’s 0.4% gain, and to rise 3.9% year-over-year, slightly down from 4.0% previously. Wage growth remains a key focus for policymakers as it ties closely to inflation dynamics. If wage growth comes in below expectations, it could further solidify market confidence in a Federal Reserve rate cut in December.

Recent economic data provides mixed signals ahead of the jobs report. The ADP private payrolls report showed 146,000 jobs added in November, below the consensus of 150,000. The ISM Services Index also softened, slipping to 52.1 in November from 56 in October, suggesting slower hiring in the services sector. However, the Challenger job cut report for November indicated layoff activity remains relatively low, signaling labor market resilience.

Initial jobless claims have been stable despite recent upticks, with the four-week average remaining below historical norms. Continuing claims, however, have bumped against three-year highs, suggesting that finding new employment may be taking longer for some workers. Meanwhile, the JOLTS report for October showed job openings rising to 7.7 million, underscoring continued labor demand.

The November report is particularly important for shaping Federal Reserve expectations for its December 18 meeting. A strong rebound in job creation is unlikely to derail the Fed’s anticipated 25-basis-point rate cut, especially if wage growth moderates and the unemployment rate ticks higher. However, an unexpected surge in job growth or wages could introduce some uncertainty into market expectations.

Analyst projections for November vary widely, with Comerica forecasting 250,000 jobs, JPMorgan estimating 275,000, and Goldman Sachs projecting 235,000. These forecasts account for the normalization of temporary distortions from October, including the Boeing strike and hurricane-related effects. Most analysts believe the underlying trend in job growth remains strong but acknowledge headwinds from slower hiring and macroeconomic uncertainty.

In summary, the November jobs report is expected to provide a much-needed reset following October’s weak data. While a rebound in job creation is widely anticipated, the report’s details—particularly revisions, wage growth, and unemployment rate changes—will be closely watched. These elements will help determine whether the Federal Reserve maintains its current easing path or signals a more cautious approach heading into 2024.