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Analysis

NFP Update | Job Growth Surpasses Expectations

BY Janne Muta

|December 8, 2023

NFP Update - In November 2023, the US economy demonstrated resilience by adding 199K jobs, surpassing market expectations of a 180K gain. In the initial reaction treasuries rallied pushing yields lower and helped the USD to move higher.

This increase in hiring followed a lacklustre October, where only 150K jobs were added, raising concerns about a cooling labour market. The November data suggests that the labour market remains healthy, contributing to overall economic stability.

Positive Earnings Impact on Inflation

The positive earnings figures, however, are likely to have a favourable impact on consumer spending and could mean inflation remains elevated for longer than expected. Therefore, the Fed might not be willing to cut rates as soon as the markets had expected. Following the jobs data, the probability of a rate cut in March dropped from 60% to 50.4%.

Job Market Overview

The labour market showed resilience with job gains in healthcare and government sectors, while manufacturing rebounded after a strike. However, retail trade employment declined, and despite exceeding October figures, job growth fell short of the 12-month average. The unemployment rate decreased from 3.90% in October to 3.70% in November, indicating a tightening labour market and economic stability.

Wage Growth and Worker Retention

Average hourly earnings rose by 0.4%, and over the past year, they increased by 4.0%, reflecting consistent wage growth and efforts to attract and retain workers. Year-over-year average hourly earnings remained at 4%, emphasizing sustained wage growth in the U.S. economy.

Economic Outlook

In summary, the November 2023 Non-Farm Payrolls report reflects a rebound in job growth, surpassing market expectations and allaying concerns of a cooling labour market. The decline in the unemployment rate, coupled with steady wage growth and increased labour force participation, paints a picture of a resilient US economy.

Long-term Economic Challenges

While challenges such as persistent inflation and global conflicts persist, the November data suggests that the labour market remains a bright spot, contributing to overall economic stability.

Implications for Federal Reserve Policy

The positive earnings figures, however, are likely to have a favourable impact on consumer spending but could mean inflation remains elevated for longer than expected. Therefore, the Fed might not be willing to cut rates as soon as the markets had expected. Following the jobs data, the probability of a rate cut in March dropped from 60% to 50.4%.

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Janne Muta

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.

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