US economy added 227,000 jobs in November

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

The US economy added 227,000 jobs in November, a sharp rebound after the previous month’s total was dragged down by hurricanes and the Boeing strike.

Friday’s number, published by the Bureau of Labor Statistics, beat a consensus forecast of 200,000 by economists surveyed by Reuters. The unemployment rate rose 0.1 percentage point to 4.2 per cent.

November’s jobs growth marked a jump from 12,000 new positions initially recorded for October — the weakest employment report of the Biden administration. The figure was revised to 36,000 in Friday’s data release.

The jobs report is one of the final big data releases before the Federal Reserve’s December 17-18 meeting, at which it will decide whether to proceed with a third consecutive interest rate cut.

Although Friday’s figures beat forecasts, analysts said they were not sufficiently strong to undermine the case for a final rate reduction this year.

“Nothing within this release will prevent the [Federal Open Market Committee] from cutting [this month],” said Ian Lyngen, head of US rates strategy at BMO.

Gregory Daco, chief economist at EY, added: “From a Fed perspective, we are seeing a gentle deceleration in labour market momentum, and there is still not much inflationary pressure coming from the labour market.”

“Therefore I think they will proceed with an additional rate cut,” he added.

US government bond yields fell as investors bet that a rate cut from the Fed this month was now slightly more likely. Trading in US futures markets indicated investors now see a roughly 89 per cent chance of a cut later this month, from a 70 per cent chance immediately before the data release.

The two-year yield, which reflects interest rate expectations, was down 0.05 percentage points to 4.1 per cent during Friday afternoon trading. Wall Street’s S&P 500 stock index was up 0.1 per cent, pulling back after hitting a record intraday high early in the session.

Recent data has suggested that the US economy remains strong and inflation is at risk of settling above the Fed’s 2 per cent target, making policymakers wary about moving too quickly on lowering rates.

Fed chair Jay Powell said this week that the Fed could “afford to be a little more cautious” on reducing rates because the US economy was in “remarkably good shape” and inflation had come in a little higher than earlier anticipated.

Powell’s fellow governor Christopher Waller warned that progress on getting inflation down “may be stalling”, although he added he supported a December cut. Michelle Bowman, a governor who opposed the Fed’s decision in September to go big with a half-point cut, echoed those concerns in remarks on Friday, saying that upside risks to inflation were prominent.

Beth Hammack, the new president of the Cleveland Fed and a voting member on the FOMC this year, said the central bank was “at or near the point where it makes sense to slow the pace of rate reductions”.

“Moving slowly will allow us to calibrate policy to the appropriately restrictive level over time given the underlying strength in the economy,” she added in a speech on Friday.

Still, the rise in the unemployment rate in Friday’s report also hinted at softening in the jobs market — a factor that will probably prompt the Fed to move ahead with a rate cut this month, said Andrew Hollenhorst, chief US economist at Citigroup.

“Powell sounded pretty upbeat over the last couple of months after we had that stronger jobs report for September, and I think he’s going to be a little less upbeat after this report,” he added.

A December cut would lower the federal funds rate to 4.25 to 4.5 per cent. The Fed is hoping to engineer a “soft landing” in which inflation moves towards the central bank’s target, without causing a recession or a large rise in joblessness.

Over the past year, the US economy has created an average of about 180,000 jobs each month. In November, healthcare, leisure and hospitality and the government were among the sectors reporting the biggest gains.

Employment in transportation equipment manufacturing rose by 32,000, helped by the end of the Boeing strike.

Along with the upward revisions to October’s jobs figures, September’s total rose as well to 255,000 jobs. Together, employment gains for the two months were 56,000 positions higher than previously reported.