A pedestrian walks past a “Hiring Now” sign in front of a U-Haul store on December 03, 2024 in San Rafael, California.
Justin Sullivan | Getty Images
After a month in which hiring was weak mainly due to storms and strikes, the jobs report scheduled for release on Friday could provide a clearer picture of where the labor market is headed.
The Bureau of Labor Statistics is expected to report Friday at 8:30 a.m. ET that nonfarm payrolls increased by 214,000 in November, a big step up from the meager increase of 12,000 in October. That month's reading was the worst for jobs gains since December 2020.
One of the things that will make the report so pivotal is that it will be the last comprehensive look the Fed will give before its next policy meeting on December 17-18. Markets are betting heavily that the Fed will agree to another quarter-point rate cut, but that could change depending on how jobs are calculated.
“Well, it should be a very healthy number, because it should bounce back from (October) when we had (Hurricane) Milton and (the Boeing strike) that led to a decline in jobs,” said Kathy Jones, chief fixed income strategist at Schwab Center. For financial research.
In fact, the October number could rise after BLS surveyors return and re-examine the month's data. The revisions to payroll reports have been overwhelming at times in the post-Covid period.
That could add to a chaotic couple of months with economic data and make the Fed's job more difficult.
“I expect the number to exceed 200,000, and the risk is probably to the upside if we get a real recovery,” Jones said. “But I'm not sure this jobs report will tell us much either, because of all the weather influences up and down. Will it really give us a clear view of the future, or will it be more important? Muddy data to deal with?”
Important to the Fed
A clear picture of the Fed is essential now as policymakers look to reset policy at a time when annual inflation rates are rising but falling, and the focus on the labor market is increasing.
Aside from the October report, the jobs picture has shown a mostly slower trend since around April, with payroll gains averaging about 128,000 new jobs per month as the unemployment rate rose to 4.1%. Fed policymakers want to lower the benchmark interest rate for short-term borrowing to a more neutral level, as they balance their focus between inflation and employment.
“This is definitely going to be noisy, because the storms and strikes are going to impact two months of data, data for the month people aren't working, and the next month when they go back to work,” said Vincent, the BNY economist. Reinhart, a former Federal Reserve official who served at the central bank for 24 years.
“The way the Fed sees it is that the slowdown in nonfarm payrolls over the course of 2024 has been basically flattening to the trend — the trend is just over 100,000 jobs being created per month — and that has not been concerning,” he added. “It was actually welcomed, because, you know, the trend is sustainable.”
Indeed, the latest signs point to the labor market stabilizing, but not for the worse.
Labor market situation
Initial weekly unemployment insurance claims have remained in a fairly steady range at about 220,000, although continuing claims earlier in November reached their highest level in about three years. Taken together, the numbers suggest that companies are not laying off workers en masse but are also not rehiring those who have lost their jobs.
A Federal Reserve economic report released on Wednesday — a “beige book” summary of current conditions — described hiring as “weak as worker turnover remains low and only a few companies have announced headcount increases.” The report said layoffs were “low” but employers indicated caution about the pace of future hiring, with more enthusiasm about entry-level workers and skilled trades.
Job openings increased in October while employment declined and the number of people who voluntarily left their jobs increased, according to Bureau of Labor Statistics data this week.
The Fed will have to weigh all these factors, as well as concerns about rising inflation, when it makes its interest rate decision and sets its expectations for the future.
Reinhart said that if the labor market can remain stable, it should not put additional pressure on inflation. “So the strategy is to try to get demand on trend, because if growth and demand are on trend, you have to maintain the current state of the labor market, and the labor market is roughly balanced,” he added.
In addition to the major gains in payrolls, the unemployment rate is expected to rise to 4.2% as the workforce sees a reshoring from October. Average hourly earnings are also expected to rise 0.3% over the month and 3.9% from a year ago, both down slightly from the previous month.
