The November jobs report revealed a rebound in payrolls after October jobs data were negatively affected by multiple hurricanes and strikes. Despite improving payrolls, a modest rise in the unemployment rate and other data in the employment situation report support the chances of an interest rate cut by the Federal Reserve on December 18.
November Jobs Report Shows Payroll Rebound
The Employment Situation report, known to economists and analysts as the jobs report, was modestly positive in November. It reaffirmed that recession is not an imminent risk while also supporting the chances for an interest rate cut by the Federal Reserve on December 18.
November payrolls reflected a net increase of 227,000 jobs in November, which was a welcome sign after the initial release data from the October jobs report showed only 12,000 jobs had been added.
A solid November payroll gain was expected because the October payroll figure was held back by multiple hurricanes and strikes. In addition to the payroll gain for November, there were also significant upward revisions of 56,000 jobs to the previous two payroll figures, with a 24,000 job revision higher in October and a 32,000 upward revision for September.
On the downside, the unemployment rate rose modestly to 4.2% from 4.1%, which was in line with the forecast from Prestige Economics. The latest quarterly Bloomberg rankings named Prestige Economics the most accurate U.S. unemployment rate forecaster in the world for the four quarters ending in Q3 2024.
While the jobs report supports the claim that the U.S. labor market is relatively solid, other recent data also reinforce this notion. After all, initial and continuing jobless claims are very low. Continuing claims are at 1.871 million, which is only around 1.1% of the labor force. Initial jobless claims are also very low, at just 224,000.
Strong Job Openings and Labor Turnover Survey data showed that there were more than 7.7 million open jobs in October 2024. While that figure is roughly 4.5 million fewer open jobs than the historic high in March 2022 of 12.2 million, 7.7 million open jobs would have been a record high before the COVID-19 pandemic. With a difference of around 5.8 million open jobs versus people collecting unemployment, it is difficult to expect very large net payroll losses across multiple months anytime soon.
Fed Implications Of The November Jobs Report
The Fed has a dual mandate to support full employment and keep inflation rates low and stable. The November jobs report, October JOLTS data, and recent weekly jobless claims reflect full employment in the U.S. labor market. However, consumer prices are not yet low and stable — or at least not yet at the Fed’s 2% inflation target. Plus, year-on-year consumer inflation rates accelerated in October for the CPI, PCE, and PCE core.
Despite these factors, a Fed rate cut on December 18 is likely.
Other data in the jobs report indicate that the U.S. labor market is slowing. The three-month average of total private payroll gains was a modest 138,000, and the unemployment rate increased as the employed series in the Household Data fell by 355,000 and the unemployed series rose by 161,000.
The Fed wants to avoid further labor market slowing, which is why the Federal Open Market Committee is likely to cut interest rates by 0.25% in its December 18 policy decision. More interest rate cuts are likely in 2025 and 2026, according to FOMC projections.
Following the release of the jobs report, the CME FedWatch Tool put the odds of a 0.25% Fed rate cut on December 18 at 87.1% as of 9:41am ET on December 6.
Market Implications Of The November Jobs Report And Payrolls Rebound
This report is the best-case scenario for those hoping for interest rate relief because payrolls improved but remained modest. Markets are likely to interpret this month’s jobs report as a sign that the labor market is solid and not flashing signs of recession. However, the labor market has slowed, and this report supports the potential for a December 18 Fed rate cut.
A rebound in payrolls with reduced recession risks and high chances of Fed interest rate cuts is likely to weigh on bond yields and the dollar while supporting equities and some industrial commodity prices.
What do you think about today’s jobs report and payrolls rebound?
Let me know in the comments below.
Also, be sure to subscribe to my YouTube channel and visit Prestige Economics and The Futurist Institute for additional content about the economy, payrolls, jobs, and financial markets.