In a surprising turn of events, the US unemployment rate unexpectedly decreased in November, indicating resilience in the labor market contrary to earlier predictions of a slowdown. The latest data released by the Bureau of Labor Statistics on Friday revealed a notable decline in the unemployment rate, dropping from 3.9% in October to 3.7% in November.
The US economy demonstrated its vigor by adding 199,000 jobs during November, surpassing the 150,000 jobs gained the previous month. Notably, the return of striking auto workers and Hollywood actors to the workforce contributed to this upswing, as per the Bureau of Labor Statistics.
Economists, who had anticipated job gains of 185,000 with the unemployment rate remaining stable at 3.9% in November, were caught off guard by the positive momentum. The robust performance was also reflected in wage growth, a pivotal factor closely monitored for inflation trends and an indicator of workers’ bargaining power. Wages increased by 0.4% on a monthly basis and 4.1% over the past year, exceeding expectations of a 0.3% monthly rise and a 4% annual increase.
Additional key indicators pointed towards a strengthening labor market. The labor force participation rate edged higher to 62.8%, up from 62.7% the previous month, while average weekly hours worked saw a marginal increase from 34.3 to 34.4.
The healthcare sector emerged as a major contributor to job growth, with an impressive addition of 77,000 jobs. Government employment rose by 49,000, reaching pre-pandemic levels, and the leisure and hospitality sector experienced a notable increase of 40,000 jobs.
Earlier in the week, labor market data had fueled speculations of a ‘soft landing,’ where inflation meets the Federal Reserve’s 2% target without a significant economic downturn. Investors had initially anticipated rate cuts in 2024 after recent data suggested the Fed was halting interest rate hikes. However, with the unexpected surge in job gains and a decline in the unemployment rate in November, investors are now reassessing the likelihood of a prolonged period without interest rate adjustments.
As of Friday morning, market expectations for a rate cut by the Federal Reserve in March had dipped to a 47% probability, down from 55% a day earlier, according to the CME FedWatch Tool. This turn of events has prompted discussions about the Fed’s stance, with some experts suggesting that the central bank may need to maintain interest rates at their current level for an extended period.
Stephanie Roth, Chief Economist at Wolfe Research, commented on the shift, stating, “This isn’t exactly the type of print they were looking for,” on Yahoo Finance Live Friday morning.
In response to the unexpected labor market strength, the Dow Jones Industrial Average (^DJI) remained relatively flat, while the S&P 500 (^GSPC) experienced a marginal 0.1% decline on Friday. The Nasdaq Composite also slipped by 0.3% (^IXIC).
Earlier in the week, signs of a cooling labor market had emerged, with the Job Openings and Labor Turnover Survey (JOLTS) report indicating a decrease in the ratio of job openings to unemployed workers. Additionally, ADP’s data revealed slower-than-expected growth in private payrolls and a continued decline in wages, particularly in the leisure and hospitality sector, potentially signaling a normalization of the labor market and a potential slowdown in payroll growth in 2024.
Source:Yahoo Finance
