Job creation in November bounced back from a near-standstill the previous month due to the diminishing effects of a significant labor strike and violent storms in the Southeast, according to the Bureau of Labor Statistics. Nonfarm payrolls rose by 227,000 for the month, compared to an upwardly revised 36,000 in October and the Dow Jones consensus estimate of 214,000. September’s payroll count was also revised upward to 255,000, an increase of 32,000 from the prior estimate. The impact of Hurricane Milton and the Boeing strike held back October’s numbers.
The unemployment rate increased slightly to 4.2%, as anticipated. This rise was attributed to a decrease in the labor force participation rate and a decline in the labor force itself. A broader measure, which includes discouraged workers and those with part-time jobs for economic reasons, inched up to 7.8%.
The data is likely to prompt the Federal Reserve to consider lowering interest rates later this month. Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management, stated, “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 labor market and gives the Fed what it needs to cut rates in December.”
Job gains were concentrated in health care (54,000), leisure and hospitality (53,000), and government (33,000), sectors that have consistently led payroll growth in recent years. Social assistance contributed 19,000 to the total.
On the other hand, retail trade experienced a decline of 28,000 workers heading into the holiday season. With Thanksgiving falling later than usual this year, some stores may have delayed hiring.
Average hourly earnings continued to increase, rising by 0.4% from the previous month and 4% over a 12-month period, exceeding expectations by 0.1 percentage point in both metrics.
Following the report, stock market futures rose slightly, while Treasury yields decreased. The report raises questions about the state of the labor market and its potential impact on Federal Reserve decisions regarding interest rates.
Traders increased their bets on a rate cut after the release of the payrolls report, with market-implied odds surpassing 88% for a quarter percentage point reduction when central bank policymakers convene on December 18.
Lindsay Rosner, head of multi-service investing at Goldman Sachs Asset Management, commented, “Data this morning was a Thanksgiving buffet with payrolls spot on, revisions positive, but unemployment ticking higher despite the participation rate falling. This print doesn’t kill the holiday spirit and the Fed remains on track to deliver a cut in December.”
Earlier in the week, Fed Chair Jerome Powell mentioned that the strong state of the economy allows him and his colleagues to be patient when deciding on interest rates. While inflation has decreased significantly from its 40-year high in mid-2022, recent months have shown a slight uptick in prices. Additionally, the October jobs report and other indicators suggest a growing but slowing labor market.
The household survey, used to calculate the unemployment rate, presented a different perspective compared to the establishment survey that provides the headline payrolls count. According to the BLS, household employment dropped by 355,000 in the month, while the labor force shrank by 193,000. The labor force participation rate declined to 62.5%, a decrease of 0.1 percentage point.
The number of full-time job holders decreased by 111,000, and part-time workers decreased by 268,000. The unemployment rate for Black workers rose to 6.4%, an increase of 0.7 percentage point.
