At a Glance

  • U.S. nonfarm payrolls increased by 227,000 in November, as the end of a strike by 33,000 Boeing workers and recovery from two hurricanes in the Southeast helped boost employment.
  • The labor market continued to cool from its post-pandemic overheated state, with the unemployment rate rising 0.1 percentage point month over month to 4.2%, the Labor Department reported Friday.
  • San Francisco Fed President Mary Daly said Friday: "The labor market remains in good shape." Citing the latest data, she said: "Employment is expanding—there is about one job opening for every unemployed worker, which is a balanced labor market. This means people are still getting jobs and businesses can find workers."

In-Depth Analysis

Average monthly job growth over the past three months was 172,000, which Brian Coulton, chief economist at Fitch Ratings, said shows "despite a slight rise in the unemployment rate, the underlying growth in labor demand remains solid."

A healthy job market increases the likelihood that the Federal Reserve will cut interest rates at its December 17-18 policy meeting, which would be the third easing since September, Coulton said.

In fact, rate futures traders on Friday raised the probability of a 25-basis-point Fed cut to 85% from 71% on Thursday, according to the CME FedWatch tool.

The Labor Department on Friday also revised October's job growth figure up to 36,000 from 12,000.

"On average, whether it's the payroll numbers, the unemployment rate, or other ways of looking at the job market, it feels like the market has cooled from the hottest state we've seen to some sustainable level of full employment," Chicago Fed President Austan Goolsbee said Friday.

"What we want to do is stabilize there rather than continue to deteriorate, and over the past few months it feels like the market has been hovering in that range," Goolsbee said during a question-and-answer session at the regional Fed.

Although the payroll data paves the way for further easing, policymakers may take time to consider the 4% annual wage growth reported Friday, Coulton said in an email.

"This won't stop the Fed from cutting rates again later this month, but it will make them think twice," he said, noting that wage growth is twice the Fed's 2% inflation target.

In recent days, several central bank officials, including Fed Chair Jerome Powell, have supported a cautious approach to future cuts in the federal funds rate.

Powell said Wednesday that a healthy job market and surprisingly strong economy give policymakers time to think about the pace of future rate cuts.

"The economy is strong, stronger than we expected in September," Powell said, when the Fed began lowering borrowing costs from a two-decade high.

"Labor market conditions are better, and downside risks seem smaller," he said in a webcast hosted by The New York Times.

"The good news is that we can be more cautious in finding the neutral rate," Powell said, referring to the level of the federal funds rate that neither restrains nor accelerates economic growth.

Since September, policymakers have cut the benchmark rate by 0.75 percentage points to a range of 4.5% to 4.75%.

Cleveland Fed President Beth Hammack said Friday that the Fed may soon need to take a more deliberate approach to easing.

"I believe we are at or near the point where we should slow the pace of rate cuts," Hammack said.

"Slowing the pace will allow us to gradually calibrate policy to an appropriately restrictive level based on the underlying strength of the economy," she said, noting that inflation, economic growth, and the labor market all exceeded the median expectations of Fed officials in September.

"For me, this situation calls for a slower pace of rate cuts than projected in September," she said. "Achieving our goals means we need to see more convincing evidence that inflation is indeed declining sustainably to 2% while maintaining a healthy labor market."