(Reuters) – U.S. job growth surged in November after being severely constrained by hurricanes and strikes, but probably does not signal a material shift in labor market conditions that continue to ease steadily and gives the Federal Reserve leeway to cut interest rates again this month.
Nonfarm payrolls increased by 227,000 jobs last month, above the 200,000 estimate of economists polled by Reuters, after rising an upwardly revised 36,000 in October, the Labor Department said on Friday.
MARKET REACTION:
STOCKS: S&P 500 E-minis were up 9 points, or 0.15%
BONDS: The yield on benchmark U.S. 10-year notesfell 4.5 basis points to 4.138%, the two-year note yield declined 6.5 basis points to 4.081%FOREX: After an initial decline, the dollar index was up 0.11% to 105.84
COMMENTS:
JACK MCINTYRE, PORTFOLIO MANAGER, BRANDYWINE GLOBAL, PHILADELPHIA (via email)
“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 (LON:NXT) 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.”
RICK MECKLER, PARTNER, CHERRY LANE INVESTMENTS, NEW VERNON, NEW JERSEY
“The report was pretty strong. The report does show the incredible resiliency of the U.S. economy but, then again, you’re at a point where we were already beginning to lower rates and easing some of the pressure higher short-term rates had on markets.
“The change in the government and the upcoming new economic agenda is really overshadowing economic news.
“The conclusion of the election took away some of the uncertainty that may have led businesses to think about adding employees or making plans for 2025. One big factor, though, will be is the government serious about a drastic reduction of federal jobs for cost-saving purposes, and what impact that will have on future job reports.”
JAMIE COX, MANAGING PARTNER, HARRIS FINANCIAL GROUP, RICHMOND VIRGINIA
“These data clear the path for the Federal Reserve to further reduce the policy rate in December–nothing in these jobs data supports a pause in normalization.
“The labor market has stabilized and remains stronger than all of the naysayers have led people to believe. A stable labor market supports a strong consumer based economy, and that’s exactly what the data have shown all year long.”
BRYON ANDERSON, HEAD OF FIXED INCOME, LAFFER TENGLER INVESTMENTS (via email)
“After a prior month of hurricanes and worker strikes, we did get a bounce back in the headline payroll numbers plus positive revisions. The bigger trends of hourly earnings still increasing at a healthy rate and unemployment rate staying relatively flat gives us confidence in the overall economy.
“Markets will react short term over small pieces of data, but we still feel the trends are stable enough for the underlying job market. There is a bifurcation of the consumer in the US, and the top quintiles have a greater share of income and wealth, and they are still spending which is buffeting this economy. Jobs creation may not be as robust as in the past years, but we are not seeing a disaster in the job market.”
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN
“A bigger bounce than expected. Payrolls recovered from the weak October reading. Wages increased at a healthy, but not alarming pace. Non-cyclical areas like healthcare and government are still the main drivers of payroll gains, but even cyclical areas are at least treading water. Overall, it looks like there’s no reason to worry about an imminent recession and there’s no reason for the Fed to take a pause on cuts quite yet.”
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK
“Job creation was in basically in line with market expectations, the (October) revisions of up 36,000 probably due to weather related situations. Wages were a little bit higher than we were looking for, but on a year to year it basically held steady.
“These are basically good numbers, and it continues to show that the average nonfarm payrolls this year have been 205,000 to 210,000. It indicates that there’s no recession in sight. This (report) does not interrupt the Fed from lowering rates at the next FMOC meeting by 25 basis points.”
GENNADIY GOLDBERG, HEAD OF U.S. RATES STRATEGY, TD SECURITIES, NEW YORK
“The market is a little bit confused as to what to do with this particular payroll report. It wasn’t quite as strong as some of the whisper numbers were expecting, the market was already 220K, so it barely beat the headline. The upward revision didn’t seem to convince markets as well, I mean 56K for the last few months. And you’ve got the four-month trend, if you smooth over some of the recent volatility, running at around 143K, so basically just below 150k, and I think that’s really the trend pace here.
“The unemployment rate rising is certainly keeping the market on their toes, so I think that’s not a positive here, but wage growth is strong. So, it’s a bit of a noisy report, but I think what it means is the Fed can safely deliver another rate cut in December and then maybe communicate a possible pause coming as soon as the January meeting.
“A 150K or so run rate for payrolls, it’s not exactly a wonderful economy, but it’s also an economy that doesn’t seem to be decelerating as sharply as everyone expected a few months ago.”
LINDSAY ROSNER, HEAD OF MULTI-SECTOR INVESTING, GOLDMAN SACHS ASSET MANAGEMENT (via email)
“Data this morning was a Thanksgiving buffet with payrolls spot on, revisions positive, but unemployment ticking higher despite the participation rate falling. This print doesn’t kill the holiday spirit and the Fed remains on track to deliver a cut in December.”
PAUL CHRISTOPHER, HEAD OF GLOBAL INVESTMENT STRATEGY, WELLS FARGO INVESTMENT INSTITUTE, ST. LOUIS, MISSOURI
“This is a pretty much in line report. What caught our eye was the tick higher in earnings. That’s going to help the economy remain strong heading into the New Year. Markets would’ve been looking for any sign of weakness.
“It probably cements the Fed with another quarter point cut in December. The jobs number is not particularly outrageously strong. It’s more in line with averages.
“The economy is fine. As long as the labor market doesn’t collapse the Fed is going to watch inflation really closely. Inflation is really kind of sticky right now, and that’s why I think we think there’s only this December cut and one more.
“Going forward for the Fed, I think that (the Fed) will probably take a pause in the New Year, at least in January. The Fed is going to want to see what the new administration’s economic whether or not the new administration’s economic plan goes into full force.”