The November jobs report showed that hiring has moderated but hasn't rolled over, as employers added 199,000 payroll positions, including a big boost from strike resolutions. The unemployment rate surprisingly fell, but annual wage growth slipped just below 4%. After the jobs report, which largely supports the case for a near-term Federal Reserve rate cut, the S&P 500 rose slightly in Friday afternoon stock market action.
Jobs Report Hits And Misses
The 199,000 overall employment gain topped Wall Street's 180,000 forecast. The 150,000 private-sector payroll rise matched estimates. Meanwhile, government payrolls rose by 49,000.
The hiring numbers somewhat overstate labor market strength, as striking United Auto Workers members returned to work at Ford, General Motors and Stellantis. The Labor Department said manufacturers of autos and parts added 30,000 workers last month.
Meanwhile, motion picture and sound recording industries added 17,000 jobs, after the union representing film and television actors agreed on a new contract with major studios.
Hiring gains in September and October were revised down by a combined 35,000 jobs. October's initially reported gain of 150,000 jobs wasn't revised.
The unemployment rate fell to 3.7% from 3.9%. Economists expected no change.
The average hourly wage rose 0.35% on the month, above 0.3% forecasts. However, annual wage growth of 4% — actually 3.96% on an unrounded basis — met expectations amid downward revisions to prior data.
Household Survey
The headline job and wage figures come from the Labor Department's monthly survey of employers. The separate household survey details labor force participation, work status and the unemployment rate.
Household survey data showed the ranks of the employed surging by 747,000. The number of unemployed workers fell by 215,000 as 532,000 people joined the labor force.
The labor force participation rate, a measure of those working or actively seeking work as a share of the 16-and-up population, rose to 62.8%, as expected.
Federal Reserve chair Jerome Powell has credited rising labor force participation, fueled in part by a return to pre-pandemic immigration, with producing a better-balanced job market. The influx of workers has allowed unemployment to rise from historic lows, even though job growth has remained pretty solid. The combination of moderating demand for workers and more supply has resulted in easing wage pressures and lower inflation.
While November's fall in the unemployment rate raised eyebrows, keep in mind that the household survey can be volatile and comes with a greater margin of error. Further, the jobless rate only fell to 3.74% when rounded to the nearest hundredth.
Fed Rate Hike Odds
Ahead of the November jobs report, markets were pricing in 2% odds of a rate hike at the Fed's Dec. 13 policy update, according to CME Group's FedWatch page. Markets saw 12% odds of a rate cut by the Jan. 31 meeting, rising to 60% for the May 1 meeting.
After the jobs report, odds of a rate cut by May initially fell to around 45%.
S&P 500, 10-Year Treasury Yield
The S&P 500 edged up 0.1% in Friday morning action, after opening modestly lower. The S&P 500 closed up 0.8% on Thursday, less than 1% below its 52-week high on Dec. 1.
The S&P 500 briefly made a run toward a 52-week high on Friday morning, stopping just short, after the University of Michigan consumer sentiment index showed a big drop in inflation expectations. The one-year inflation outlook fell to 3.1%, the lowest since March 2021, from 4.5% in November. Five-year inflation expectations eased to 2.8% from 3.2%.
But that good news for the Fed may have been offset by the jump in the consumer sentiment gauge to a five-month high. That suggests consumer spending could remain resilient amid lower market interest rates, lower gas prices and higher stock prices, leading the Fed to favor a deliberate pace of rate-cutting.
The tumbling 10-year Treasury yield, which has been a key to the S&P 500 rally, reversed course on Friday. The 10-year yield rose 12 basis points to 4.25%.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
More Jobs Report Details
The manufacturing sector added 28,000 jobs, after a drop of 35,000 jobs in October, with the difference largely related to the UAW strikes.
On a negative note, retailers cut 38,400 jobs on a seasonally adjusted basis, meaning holiday hiring has been softer than is typical.
Health care and social assistance employers accounted for the bulk of the hiring, adding 93,200 jobs, including 77,000 in health care.
If you exclude the 47,000 strike-related job gain, then almost all the job gains came in noncyclical industries, primarily health care. That would suggest the economy is in danger of stalling unless the Fed cuts rates quickly.
However, the picture isn't quite as stark on a three-month basis. From September through November, private job gains have averaged 144,667 per month, with healthcare jobs accounting for 45% of the gains.
