A hotter-than-expected November nonfarm payrolls report out Friday signaled that the U.S. economy is still humming along nicely. But while it was welcome news for the U.S. workforce, markets flinched at the implication that looser Federal Reserve policy might be farther off than many hoped.
The Labor Department reported that nonfarm payrolls grew by 199,000 in November, easily topping expectations for 185,000. The figure marked the 35th straight month of jobs growth.
Here’s a quick look at the most pertinent details, most of which exceeded expectations and illustrated a still-resilient economy.
- November payrolls: +199,000 (vs. +185,000 est.)
- November unemployment: 3.7% (vs. 3.9% est.)
- November hourly earnings: +0.4% (vs. +0.3% est.)
- October payrolls (revised): +150,000 (vs. +150,000 previously)
- September payrolls (revised): +262,000 (vs. +297,000 previously)
“While the Fed will likely still hold rates steady at the upcoming meeting, the lack of more material softness in the labor report and the continued pressure on labor costs is likely to lead them to stay the course with higher rates for longer than the markets have recently begun to believe,” says Jason Pride, Chief of Investment Strategy & Research at Glenmede. “Fed Chair [Jerome] Powell will likely find reports like this, along with the recent dramatic shift in investor expectations, as creating a need for more hawkish messaging at the upcoming Fed meeting.”
This came amid a week in which several research outlets, including Wells Fargo, Janus Henderson, and Stifel, communicated more hesitancy about the potential for rate cuts than what the market had been pricing in.
Digging deeper into the November jobs report, the greatest gains were seen in leisure and hospitality (+123,000) and health care and social assistance (+82,600). Job growth also returned to the manufacturing industry (+14,000) thanks to the wind-down of several strikes.
On the flip side, temporary help services jobs declined by 48,500, 45,600 jobs were lost in the retail trade, and transportation and warehousing payrolls saw a decline of 37,100.
Expert Reactions to November’s Jobs Report
Here’s what strategists, financial managers, and other experts had to say about the November employment situation:
Stephen J. Rich, Chairman & CEO of Mutual of America Capital Management
“This month’s positive job growth following October’s slower numbers is evidence that the jobs market continues to be resilient. While many believe that the Federal Reserve may be done raising interest rates, we believe interest rates will remain elevated through at least the first half of 2024. The elongated rate-hike cycle has not ruled out the possibility of a recession later next year.”
Steve Wyett, Chief Investment Strategist at BOK Financial.
“The November jobs report is another good number as we think about an economy which can continue to grow as we move into 2024. … A decline in the headline unemployment rate from 3.9 to 3.7% moves us further away from triggering a recession indicator from the job market.
- Related: The Best REITs to Invest In for 2024
“For the Fed, this report, along with additional reports on inflation and the job market, should provide a picture where they remain stable at next week’s meeting. The debate as we move into 2024 will be around if and when the Fed begins to lower rates and job reports like this will tend to keep the Fed higher for longer than current market expectations.”
Michelle Cluver, Portfolio Strategist, Global X
“A surprisingly hot jobs report wasn’t what the market called for. After a month of reasonably soft economic data and a week that was dominated by labor data coming in below expectations, today’s nonfarm payrolls beat expectations. … Overall, this was a hotter-than-expected report, and Treasury yields increased sharply on its release as markets slightly readjusted the scale of interest rate cut expectations for 2024.”
David Russell, Global Head of Market Strategy, TradeStation
“Today’s jobs report was a non-event. It wasn’t strong enough to bring back the hawks, but also not weak enough to move rate cuts forward. A soft landing for the economy is becoming more likely. The main risk is that the Fed won’t see any reason to rush rate cuts. That could trigger some anxiety around next week’s meeting.”
Candice Tse, Global Head of Strategic Advisory Solutions at Goldman Sachs Asset Management
“Today’s payrolls print signals that labor markets continue to generate healthy job growth, and the dip in the unemployment rate is showcasing that labor markets are making incremental progress without experiencing material damage from inflation improvement. From an investment standpoint, attractive cash yields have been a staple of 2023, but 2024 may feature an opportunity to cash out and pave the way for the resurgence of a balanced portfolio”