The November jobs report showed that payroll gains bounced back, after the labor market faltered in October amid the Boeing strike and a hit from Hurricane Milton. However, the unemployment rate edged higher, helping to clear the way for a Dec. 18 Federal Reserve rate cut. The S&P 500 rose modestly, putting another record close into view.
The jobs report has been one of two big hurdles potentially standing in the way of a rate cut at the upcoming Fed meeting, with next week's set of inflation reports being the other. The Fed has set a high bar for skipping a rate cut, and that bar just got raised a lot higher, with a report showing that the labor market has stabilized, but isn't reaccelerating.
Jobs Report Hits And Misses
The U.S. economy added 227,000 jobs in November vs. estimates for 211,000, according to Econoday. Private-sector employers added 194,000 jobs vs. expectations of a 200,000 payroll gain. Government jobs rose by 33,000.
October's job gain was revised up to 36,000 from an initially reported 12,000.
Hiring gains in September and October were revised up by a combined 56,000 jobs.
The unemployment rate ticked up to 4.2%, as expected, from October's 4.1%.
Average hourly earnings rose 0.4% vs. October and 4% vs. a year earlier, both just above estimates.
Labor Market Moderation
To see through the effect of storms and strikes, it makes sense to average the job gains in October and November to get the underlying trend. The average monthly job gain in October and November was 131,500. That's a pretty modest pace, probably too little to keep up with the recent trend in labor force gains.
Household Survey
The household survey showed that the ranks of the employed actually fell by 355,000, while the labor force declined by 193,000. The difference, though thrown a bit off by rounding, meant a 161,000 rise in the ranks of the unemployed.
Labor force participation, which declined for a second straight month after a 220,000 drop in October, will be key to watch in the months to come. Fed Chairman Jerome Powell noted on Wednesday that the labor-force boost from immigration has substantially slowed in the second half of 2024.
The payroll numbers are derived from a midmonth survey of employers. The household survey, from which the unemployment rate is derived, comes with a higher margin of error, making monthly changes less reliable.
Fed Rate-Cut Odds Jump
Odds of a quarter-point Fed rate cut on Dec. 18 leapt to 87% from 70% prior to the jobs report, according to CME Group's FedWatch page.
Markets are currently pricing in a year-end 2025 federal funds rate of 3.70%. That means markets are leaning toward 75 basis points in rate cuts next year, rather than just 50 basis points, assuming a quarter-point move in December.
Despite a jobs report that's seen as nearly closing the deal for a Dec. 18 Fed rate cut, markets are convinced that policymakers will take a break after that. Odds of a further rate cut at the Jan. 29 meeting currently stand at just 27%.
More Jobs Report Details
Health care and social assistance employment rose by 72,300. The leisure and hospitality sector added 53,000 jobs after just a 2,000 gain in October. Retailers cut 28,000 jobs, adjusted for seasonal effects, which means a bit less holiday hiring than expected. Manufacturers added 22,000 jobs, after factory employment plunged by 48,000 in October, amid the Boeing strike. The construction sector added 10,000. Financial sector employment rose by 17,000.
S&P 500
The S&P 500 rose 0.15% in Friday stock market action, following the jobs report. After rising 0.6% to a new closing high on Wednesday, the S&P 500 inched 0.02% lower on Thursday.
Through Thursday, the S&P 500 is up 27.6% for the year, including a 5.2% gain since Election Day.
The 10-year Treasury yield slipped three basis points to 4.15% on Friday morning, near the lowest level since mid-October.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
