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BLS Shows 199K New Jobs; Unemployment Down to 3.7%

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The big Employment Report for November — consisting of nonfarm payrolls from the establishment and the household survey from the U.S. Bureau of Labor Statistics (BLS) — is out this morning, capping off this month’s Jobs Week following JOLTS data, ADP (ADP - Free Report) private-sector payrolls and Weekly Jobless Claims throughout this past week. Headline 199K new jobs filled last month is somewhat higher than expectations, and a big jump from the unrevised 150K posted a month ago. The Unemployment Rate dropped 20 basis points (bps) to 3.7%.

This 199K figure is roughly in the median of the past several months, which had been roughly double during the Great Reopening period following the Covid pandemic. September nonfarm payrolls shed 35K from previous prints to 262K — much higher than the 105K posted in June but well below the 472K logged back in January of this year. The 3.7% Unemployment Rate is the lowest read since July; it also indicated 6.3 million Americans remain out of work.

Hourly Wages grew more than expected month over month: +0.4% from +0.3% expected and +0.2% logged a month ago. Year over year, however, this tally has dipped 10 bps, as expected, to 4.0% — the lowest since June 2021. Labor Force Participation budded slightly higher to 62.8%, as did the Average Workweek, now +34.4 hours.

Some of these jobs gains reflect the return to work of striking auto workers and motion picture participants, including screenwriters and actors. Auto workers gained +30K positions filled in November, +17K for motion picture workers. Healthcare led all industries, +77K, while the Government grew +49K for the month, and Leisure/Hospitality +40K. As far as industry job losers, Retail came in -38K and Transportation/Warehousing was -5K. We expect both of these prints to rebound in December for holiday shopping season.

At first, pre-market futures did not like these numbers at all, falling to negative triple digits on both the Dow and Nasdaq. But then the blue-chip Dow bounced back to positive single-digits before dipping back into the red marginally. Much of the good news in the current and near-future economy has already been priced in, and now the perceived pivot is to determine when the Fed will start cutting interest rates. Strong jobs numbers is anathema to this; investors can expect higher interest rates for longer into 2024, and this is translating to dimmer futures, but only slightly.

Next week brings us the next Federal Open Market Committee meeting, at which time the Fed will without a doubt decide to keep interest rates in the 5.25-5.50% range. Fed members are currently in a “blackout period” ahead of the meeting, but the only intriguing aspect of it is whether the Fed will discuss a timeline for cutting rates. The Fed remains focused on bringing about a soft landing to the economy, so won’t likely be too eager to cut rates too soon. Expect some trading adjustments based on this realization when it shows up.

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