Job Market Rebounds in November
The US job market bounced back in November, adding 227,000 nonfarm payrolls, surpassing expectations and rebounding from a near-standstill in October. The Bureau of Labor Statistics reported that the unemployment rate edged higher to 4.2%, while the labor force participation rate declined.
Strong Gains in Healthcare, Leisure, and Government
Job gains were led by healthcare, leisure and hospitality, and government sectors, which have consistently driven payroll growth over the past few years. Social assistance also added 19,000 jobs to the total. However, retail trade saw a decline of 28,000 heading into the holiday season, possibly due to stores holding off on hiring until later in the year.
Worker Pay Continues to Rise
Average hourly earnings increased by 0.4% from the previous month and 4% over the past 12 months, both exceeding expectations. This suggests that workers are seeing steady income growth, which could support consumer spending.
Fed Likely to Cut Interest Rates
The report provides a green light for the Federal Reserve to lower interest rates later this month. With the labor market still growing, albeit at a slower pace, and inflation under control, the Fed is likely to cut rates to support the economy.
Market Reaction
Stock market futures edged higher following the report, while Treasury yields declined. Traders increased their bets on a rate cut, with market-implied odds rising above 88% for a quarter percentage point reduction.
Fed Officials Weigh In
Federal Reserve Chair Jerome Powell stated earlier this week that the strong economy allows policymakers to be patient when making interest rate decisions. Other officials have indicated that additional rate cuts are likely, pending changes in economic data.
Labor Market Trends
While the labor market is still growing, recent reports suggest that it is slowing. The October jobs report and other indicators point to a labor market that is expanding, but at a more moderate pace. Inflation, which had been rising, has cooled, providing the Fed with room to maneuver on interest rates.
Household Survey
The household survey, used to calculate the unemployment rate, painted a similar picture as the establishment survey. Household employment rose by 174,000, while the labor force contracted by 193,000. The labor force participation rate declined to 62.5%, a decrease of 0.1 percentage point.
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