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A rebound in job growth in November after disruption caused by October strikes and hurricanes was not enough to keep unemployment from rising, bolstering the case for a Dec. 18 Fed rate cut and more easing next year.
Employers added 227,000 workers to their payrolls in November, and revisions to previous estimates showed 56,000 more jobs were created in September and October than previously thought, the Bureau of Labor Statistics reported Friday.
But 7.1 million Americans are unemployed, up 14 percent from a year ago, driving the U.S. unemployment rate back up to 4.2 percent.
Although payroll growth rebounded significantly from October, “the report overall shows more softening in the labor market,” Mortgage Bankers Association Chief Economist Mike Fratantoni said in a statement.
Mike Fratantoni
“Fed officials have pointed to their ‘data dependence’ when it comes to decisions about future rate cuts,” Fratantoni said. “These data support a cut at the December meeting, and MBA forecasts that the Fed will continue to reduce short-term rates in 2025, although they are likely to slow the pace of cuts.”
Futures markets tracked by the CME FedWatch tool on Friday put the odds of a 25 basis-point December Fed rate cut at 89 percent, up from 66 percent on Nov. 29. A basis point is one-hundredth of a percentage point.
Yields on 10-year Treasury notes, a barometer for mortgage rates, initially dropped 5 basis points after the release of Friday’s jobs report, before climbing back toward Thursday’s close of 4.18 percent.
Payroll growth slows
Initial estimates that employers added only 12,000 jobs in October were revised upward to 36,000 in Friday’s jobs report, and the estimate for September payroll growth was also boosted by 32,000 workers.
Employment trended up from October to November in health care, leisure and hospitality, government and social assistance, while retailers slashed 28,000 jobs.
Samuel Tombs
But the overall trend shows job growth weakening, averaging 132,000 a month between September and November, Pantheon Macroeconomics Chief U.S. Economist Samuel Tombs said in a note to clients.
That’s down from an average of 191,000 new jobs a month during the first three quarters of 2024, and “likely below” the breakeven rate of about 175,000, Tombs said.
“The muted rebound in payrolls in November after October’s hurricanes and strikes implies that the underlying trend has continued to deteriorate, bolstering the case for the [Fed] to reduce the funds rate again later this month,” Tombs said.
Pantheon Macroeconomics expects monthly payroll growth to average about 100,000 jobs next year, “steering the [Fed] to reduce the funds rate by 25 basis points at alternate meetings despite the risk of tariff-fuelled inflation.”
Unemployment on the upswing
Wednesday’s Job Openings and Labor Turnover Summary (JOLTS) report showed job openings down by 941,000 in October from a year ago.
“While we are not seeing a pickup in layoffs, new entrants and individuals who lose jobs are having a more difficult time regaining employment,” Fratantoni said.
That helps explain the rise in unemployment from 6.98 million in October to 7.14 million in November, bringing the unemployment rate back up to the second highest level of the year.
After hitting a 2024 peak of 4.3 percent in July, unemployment had retreated to 4.1 percent in September.
Nearly one in four of those who are unemployed (23.2 percent) have been out of work for 27 weeks or more. At 1.7 million, the ranks of the long-term unemployed have swelled by 500,000 from a year ago.
The 161,000 rise in unemployment from October to November is too small to be statistically significant, Tombs said, but the 496,000 increase over the last six months “is significant, and the increase is corroborated by continuing claims data and consumer confidence surveys.”
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