The October jobs report was weak, with a sharp slowing in net nonfarm payrolls due to hurricane-related disruptions and strikes. The November jobs report is likely to reflect more jobs and a rebound in payrolls, although the unemployment rate could rise further.
Weak October Jobs Report Impacted By Hurricanes And Strikes
The labor market weakened significantly in October, with only 12,000 net new jobs added during the month. There were significant downward revisions of 112,000 jobs to the previous two payroll reports. On the upside, the unemployment rate was unchanged at 4.1%
These data are released monthly in the Employment Situation report from the U.S. Bureau of Labor Statistics, which economists, analysts, and traders informally call the jobs report.
While some of the weakness in payrolls was due to the aftermath of hurricanes Helene and Milton as well as labor market strikes, it’s unclear how much.
In the October jobs report, the BLS noted, “It is likely that payroll employment estimates in some industries were affected by the hurricanes; however, it is not possible to quantify the net effect on the over-the-month change in national employment, hours, or earnings estimates because the establishment survey is not designed to isolate effects from extreme weather events.”
The October jobs report did not stoke recession fears because of the exceptional circumstances surrounding the slowdown in net nonfarm payroll gains.
An improvement in November nonfarm payrolls is likely. However, if the November jobs report does not improve significantly from October, fears could rise as hopes for a soft landing or no landing economic scenario fade.
November Jobs Report Implications For Fed Policy
As of November 30, the CME FedWatch Tool reflected a 66% probability of a 0.25% interest rate cut on December 18. With elevated levels of CPI and PCE inflation, the November jobs report will be critical for the future of Federal Reserve policy at the next Fed meeting on December 18 and interest rate decisions in 2025.
Aside from the forthcoming interest rate policy decision, the December Fed statement will accompany Federal Open Market Committee interest rate, GDP, unemployment, and inflation forecasts.
The September 2024 interest rate policy projections from the FOMC reflected median forecasts of Fed interest rates at 4.4% for the end of 2024, 3.4% for the end of 2025, and 2.9% for the end of 2026.
Prestige Economics expects the December FOMC forecasts to convey directionally similar expectations for interest rates, with multiple cuts likely in 2025 and 2026.
If the November jobs report improves, the potential for a December 18 interest rate cut could fall. However, if November payrolls do not improve significantly, the potential for a December 18 interest rate cut from the Federal Reserve would increase.
November Jobs Report Implications For Financial Markets
The jobs report is typically the most important economic release of the month. It’s released early in the month, and it usually sets the cadence and expectations for the subsequent economic releases of the month.
Improvements in November payrolls may be seen as reducing the imminent need for Fed interest rate cuts. However, stronger payrolls would restore hope for a soft landing or no landing economic scenario. A solid report would likely support equity markets and may even support the dollar.
However, weak November payrolls would likely weigh on equities and the greenback.
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