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Hiring rebounded in November as the labor market normalized after a rough October.
Nonfarm payrolls rose by 227,000 last month, according to data from the Bureau of Labor Statistics (BLS) released Friday. That surpassed estimates compiled by FactSet (FDS+0.01%).
The unemployment rate ticked up 0.1 percentage point from October to 4.2%, consistent with Wall Street expectations.
Job creation recovered from a weak October, when the labor market suffered dual blows from hurricanes and a massive work stoppage at Boeing (BA-0.35%). October hiring was upwardly revised to 24,000 from 12,000.
September job creation was also revised upwards to 255,000 from 223,000. Given these revisions, employment in September and October combined is 56,000 higher than was previously reported, the BLS said.
The Federal Open Market Committee, the decision-making branch of the Federal Reserve Bank, is set to meet for the last time this year on Dec. 17 and 18. Economists widely expect the central bank to carry out its third consecutive interest rate cut, lowering the federal funds rate by another 25 basis points to 4.25%-4.50%.
So far this year, the Fed has lowered interest rates in September and November — its first cuts in more than four years — for a total of 75 basis points, as it looks to balance inflation and labor market concerns.
The Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) index, rose 2.3% year-over-year and 0.2% on a monthly basis in October. Core PCE, excluding food and energy, rose 2.8%.
While inflation has largely continued to move towards the Fed’s 2% target, some central bank officials have expressed concern over the timing of their goals. Fed Governor Christopher Waller said Monday that he is worried that the Fed’s fight against inflation may be “stalling.”
“Overall, I feel like an MMA fighter who keeps getting inflation in a choke hold, waiting for it to tap out yet it keeps slipping out of my grasp at the last minute,” he said in prepared remarks at the American Institute for Economic Research Monetary Conference.
That could provide further incentive for the Fed to slow its pace of rate cuts next year as it balances progress on inflation with its mandate to maximize employment.
Rick Pitcairn, Chief Global Strategist at Pitcairn Financial Group, said the Fed — and the market as a whole — are preparing for a potential resurgence in consumer prices.
“Historically, inflation has come in waves, and those waves are like two, three years,” Pitcairn said. “But right now, it’s trending down. I think it continues to trend down through the first part of 2025. But I think the Fed is concerned, and as market observers, we should be concerned that we don’t end being too sanguine around inflation.”
President-elect Donald Trump has also promised a flurry of tariffs once he takes office in January, which could put additional upward pressure on the cost of a number of products. Plans include a 10% to 20% tariff on imports from all nations, and a 60% to 100% tariff targeting goods from China. Last week, Trump also vowed to slap Mexico and Canada — America’s two largest trade partners — with 25% tariffs on day one of his new administration.
Goldman Sachs (GS+5.87%) is forecasting further consecutive cuts in January and March, followed by quarterly cuts in June and September. However, that pace could slow earlier in 2025, the investment bank said.