As people stroll past ‘hiring now’ signs in places like a U-Haul store in San Rafael, California, you might wonder how the job market really stands. With weather disrupting plans and strikes halting progress recently, the jobs report coming out this Friday should shed light on the future direction for labor.
The Bureau of Labor Statistics is gearing up to release data Friday morning at 8:30 a.m. ET, with expectations pointing to a promising rise in nonfarm payrolls—214,000 new jobs added in November. This marks a hopeful leap from the lackluster 12,000 jobs that October managed to muster, October being the weakest since late 2020. It’s a crucial report because it’s the last substantial glimpse the Federal Reserve gets before its upcoming policy meeting on December 17-18. The markets have been ticking along, anticipating perhaps another subtle nudge—a quarter-percentage-point interest rate cut—but Friday’s figures could tip the scales.
Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research, expressed her thoughts, “You’d think this number would be robust, given we’re bouncing back from October’s setbacks due to Hurricane Milton and strikes affecting companies like Boeing.” There’s also a chance October’s numbers might look a bit brighter after a fresh evaluation from BLS surveyors who can sometimes find significant discrepancies when they revisit the numbers.
We’re in for a bit of a messy patch with all the shifts in economic data, which can make it challenging for the Fed to navigate its course. “I’d reckon we’ll see over 200,000 jobs added, and we could see an even bigger upper swing if there’s a genuine rebound,” Jones added. “But, given the fluctuations due to weather, will this report really clear the fog, or just add to the muddled picture?”
### Essential Deduction for the Fed
For the Federal Reserve, getting a precise read on the labor market is more crucial than ever as they’re navigating rising inflation paired with a cooling but essential employment picture. Aside from the odd October figures, we’ve observed a decelerating trend in job growth since approximately April, with monthly payroll additions averaging out to 128,000 as the unemployment rate inched up to 4.1%. The Fed seems keen on dialing down its short-term borrowing rate to achieve a neutral stance, looking to strike a balance between inflation and employment concerns.
Vincent Reinhart, an economist at BNY and former Fed insider, remarked, “The recent disruptions stir up some noise in the data for both months when disruptions and recoveries happen.” But from the Fed’s vantage point, the slowing of nonfarm payroll growth through 2024 wasn’t alarming; it was viewed as aligning with trends above the 100,000 mark monthly—something manageable and actually favorable toward stability.
From recent insights, the job market is neither deteriorating nor racing ahead. It seems to be leveling out, which could be a good thing.
### Assessing the Labor Market Health
The current state of unemployment claims suggests stability, hovering near the 220,000 mark. Although there was a spike in ongoing claims earlier in November – the highest in the last three years – it’s a mixed bag. Companies aren’t laying off workers in droves, yet they remain cautious about rehiring.
The Fed’s latest “Beige Book,” summarizing prevailing conditions, painted a subdued hiring picture. Turnover is low, and firms are hesitant about expanding teams considerably, though they show interest in bringing fresh faces into entry-level positions and skilled trades.
Meanwhile, October witnessed a rise in job openings, but the pace of hiring slowed, with more employees choosing to leave voluntarily, according to recent BLS data. This array of factors, intertwined with inflationary pressures, complicates the Fed’s decisions on interest rates and future policy pathways.
For now, if the labor market manages to stay the course, it should steer clear of adding inflationary heat, Reinhart commented. The goal appears to be keeping demand on a steady track—ensuring the labor market remains balanced. Alongside the headline numbers, the unemployment rate might tick slightly up to around 4.2%, and average hourly earnings could see a minor rise, notching up 0.3% for the month and 3.9% year-over-year, both slightly down from previous trends.
