Friday’s NFP report didn’t bring any big surprises. In November, employment in the United States grew by 227,000 which was slightly higher than the market expected. However, it is worth remembering that the November data was to a large extent inflated due to the cessation of one-time factors which affected the weak October result. These involve hurricanes and strikes at Boeing factories. The labor market remains fairly solid, though the unemployment rate slightly increased.
Additionally, data for September and October were revised upwards adding almost 60,000 together. The scenario of the Federal Reserve cutting interest rates next week was supported by an increase in unemployment rate – up to 4.2%. On the other hand, a potential deterrent for such a decision could be the relatively strong growth in wages (0.4% m/m and 4% y/y).
It should be kept in mind that the high number of new jobs is partially a result of a weak October. So, we observe a kind of reaction. The basic trend of employment growth ranges from 100 to 150 thousand new jobs per month.
The market has confirmed that the negative surprise from the previous month was due to one-time factors. The Federal Reserve will certainly pay attention to the unemployment rate reaching the highest level since July. The increase to 4.2% does not stem from a larger number of people entering the labor market, but from a smaller number of employed individuals according to the survey of households. However, to confirm that the upward trend is evident, we will have to wait for subsequent reports.
In their recent statements, the Fed emphasized that it does not expect further cooling in the labor market. It should be satisfied with the rebound in job creation but a higher jobless rate could cause some concern. After the data, the market slightly increased the pricing of interest rate cuts at the December meeting. Currently, the likelihood that the Federal Reserve will again loosen its monetary policy (by 25 basis points) exceeds 80%. So, the base scenario is a rate cut in December followed by a cautious approach in subsequent months, i.e., a pause in January.
Author: Łukasz Zembik, Oanda TMS Brokers.
Source: https://ceo.com.pl/piatkowy-raport-nfp-bez-niespodzianek-solidny-rynek-pracy-ale-rosnaca-stopa-bezrobocia-wspiera-grudniowa-obnizke-stop-przez-fed-79153
