Seasonal hiring lent a helping hand last month as November nonfarm payrolls beat expectations, but a small move higher in unemployment indicated at least a little continued weakness in the job market.
The Labor Department reported Friday that nonfarm payrolls grew by 227,000 in November—a massive rebound from October’s weak jobs total, and also better than economists’ expectations for 214,000 jobs created. October’s tepid results were upgraded by 24,000 jobs, to 36,000, while September’s jobs total was upgraded by another 32,000 jobs, to 255,000. That marked a 47th consecutive month of payroll gains.
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However, November’s unemployment rate of 4.2%, while in line with economists’ estimates, was up from October’s 4.1% and back to its level from August.
Here’s a brief look at the jobs report’s most pertinent details:
- November payrolls: +227,000 month-over-month (estimate: +214,000)
- November unemployment: 4.2% (estimate: 4.2%)
- November hourly earnings: +0.3% (estimate: +0.3%)
- October payrolls (revised): +36,000 (+12,000 previously)
- September payrolls (revised): +255,000 (+223,000 previously)
Steve Rick, Chief Economist at financial services provider TruStage, notes that November’s beat “can be partly attributed to the boost in seasonal positions in preparations for an influx of holiday shopping.” Still, he calls the bounce-back in last month’s payrolls “a key indicator that while the market was hit heavily by outside forces in October, they did not leave long-term damage to the market.”
That said, experts also didn’t see enough in November’s numbers to believe the Federal Reserve would stay its hand on interest rates during its December meeting.
“This jobs report came out right in the Goldilocks zone: not too hot so as to derail interest rate cuts in December (or next year), but also not too cold which could have spooked financial markets about the underlying health of the U.S. economy,” says Josh Jamner, Investment Strategy Analyst at ClearBridge Investments. “The just-right report should be a benefit to risk assets at the margin.”
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Digging deeper into the November jobs report …
Health care continued to be a large net positive for payrolls, adding 54,000 jobs—not far off its 12-month average of 59,000. Leisure and hospitality jumped from a small 2,000-job gain in October to adding 53,000 positions in November. Government employment was better by 33,000 jobs, as was transportation equipment manufacturing, though the latter was largely affected by the return of striking workers.
The biggest loser last month was the retail trade, which lost 28,000 jobs, including an employment decline of 15,000 among general merchandise retailers.
“Today’s jobs report data indicates that the economy was driven by expansion in services,” says Scott Helfstein, Head of Investment Strategy for fund provider Global X. “Manufacturing is still lagging, but there are signs of a rebound in this jobs report. Manufacturing added employees for the first time in three months.”
Helfstein also joined a chorus of strategists that believe this report did nothing to blunt rate-cut expectations for later this month.
“Full employment and a little further to go on inflation. The Fed talked about balancing the risks of prices versus labor in the last two meetings. The risks seem balanced, and we think the Fed is inclined to keep cutting. Expect another [25-basis-point cut] in December.”
The market is effectively pricing in a quarter-point rate hike, too. As of Friday morning, the CME FedWatch Tool, which uses Fed funds futures prices to track the probability of a change to the central bank’s benchmark rate, showed an 87% chance that the Federal Reserve would bump the Fed funds rate lower at the next Federal Open Market Committee meeting, set for Dec. 17-18.
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However, despite the optimism from both Wall Street and the expert set, Federal Reserve board member Michelle Bowman warns about the risk of further rate cuts.
“Unemployment remains at historically low levels, well below my estimate of full employment. Labor market remains tight. Inflation is uncomfortably above our 2% goal,” she says. “Upside risks to inflation remain prominent. … I continue to see greater risk to the price stability side of our mandate.”
More Expert Reactions to November’s Jobs Report
Here’s what strategists, financial managers, and other experts had to say about the November employment situation:
Jason Pride, Chief of Investment Strategy & Research, Glenmede
“There’s a fine line between normalization and deterioration in the labor market, but the U.S. still appears to be following the normalization path. The jobless rate is bouncing around the low-4% range, which is roughly consistent with the natural rate of unemployment—that is, the baseline level of joblessness that persists in a well-functioning economy due to frictional and structural factors. Sub-4% unemployment was not sustainable over the long-term, but the low-to-mid 4% range could be a level unemployment sits at for some time in a steady-state, late-stage expansion.
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“More so than usual, investors should be on watch for where the labor market goes from here. The number of employed persons from the household survey is now down almost 0.5% from its all-time peak, which is historically consistent with mid-cycle adjustments. It usually takes employment drawdowns of 1% or more to signal imminent recession in the U.S., suggesting that investors should keep their ears close to the ground on the state of the labor market.”
Adam Hetts, Global Head of Multi-Asset, Janus Henderson Investors
“The strong November [nonfarm payrolls] at 227,000 included some reversals from October and was further offset by a tick up in the unemployment rate to 4.24%. This big rebound from a distorted October read is actually quite balanced and should relieve some economic concerns, as well as keep the December 18th rate cut expectations on track. Zooming out a bit from today, the trend of a slowly slowing labor market continues to encourage rate cuts while not overly threatening the late cycle economy.”
Jack McIntyre, Portfolio Manager, Brandywine Global
“Employment reports are always important to both the markets and the Fed, but in the hierarchy of economic data, there has been a shift. Next week’s inflation report will be more impactful as inflation is back to being the critical variable. November’s labor release was as expected, resulting in no significant repricing of Fed expectations in 2025. It allows them to ease this month, but next week’s CPI release could change that outcome.
We think the Fed shifts to a more patient tone (think slow and steady) as there is no pressure for them to increase the scale of monetary easing going into 2025. The Fed’s terminal rate is going to be equally as important as the path of how they get to it.”
