After a month marked by subdued hiring due to storms and strikes, the upcoming jobs report on Friday is anticipated to offer a clearer insight into the direction of the labor market. The Bureau of Labor Statistics is projected to release data on Friday at 8:30 a.m. ET, indicating an increase of 214,000 nonfarm payrolls in November, a significant improvement from the meager gain of 12,000 in October, which was the lowest since December 2020.
This report is crucial as it will be the final comprehensive update the Federal Reserve receives before its upcoming policy meeting on Dec. 17-18. Market expectations heavily lean towards the Fed implementing another quarter-percentage-point interest rate cut, pending the outcome of the jobs report.
Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research, expressed optimism regarding the upcoming report, attributing the anticipated healthy number to a rebound from the impact of Hurricane Milton and the Boeing strike in October. The October figures might be revised upwards after a reevaluation of the data by BLS surveyors, a common occurrence in the post-Covid era.
The economic landscape has been tumultuous in recent months, with various factors affecting data interpretation and complicating the Fed’s decision-making process. Policymakers are striving to recalibrate policies amidst elevated but easing annual inflation rates and a heightened focus on the labor market.
Vincent Reinhart, a BNY economist and former Fed official, highlighted the challenges posed by disruptions such as storms and strikes, which can distort data for multiple months. The Fed aims to maintain a balance between inflation and employment, with a focus on achieving a sustainable trend in job creation.
Recent indicators suggest a stabilization in the job market without significant deterioration. While initial weekly unemployment insurance claims have remained steady, continuing claims have risen to a three-year high. The Fed’s “Beige Book” summary noted subdued hiring and cautious optimism among employers regarding future hiring trends.
The Fed will need to consider these factors, along with concerns about inflation, when making its rate decision and outlining its future outlook. A steady labor market should help alleviate inflationary pressures, according to Reinhart, by maintaining demand at a sustainable level.
In addition to the expected increase in payrolls, the unemployment rate is forecasted to rise to 4.2% as more individuals re-enter the labor force. Average hourly earnings are projected to increase by 0.3% monthly and 3.9% annually, slightly lower than the previous month’s figures.
