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Strong US Non-Farm Payrolls print in November "challenges the notion of a December cut"

Journalist: John Choong (Head of Markets and Research), Newspage

ended 06. December 2024

US non-farm payrolls (NFPs) for November rebounded to 227k from an upwardly revised 36k, higher than last November's figure of 182k.

The unemployment rate ticked up slightly to 4.2%. However, the participation rate did drop lower to 62.5%, against consensus of 62.7%. This means that the participation rate is still 0.8% below pre-pandemic levels.

Average hourly earnings remain sticky at 4.0% on an annualised basis, after a tick up last month. And on a month-on-month basis, average hourly earnings posted another gain of 0.4%, unchanged from last month.

Newspage asked experts for their opinions on what this could spell for a December rate cut, the inflation outlook, and the US economy.

3 responses from the Newspage community

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Editor
Gabriel McKeown
Political & Economics Writer at Sad Rabbit - Substack Newsletter
The US labour market has roared back to life, painting a picture of resilience and representing a dramatic turnaround from October's poor figures following the hurricane. The headline numbers paint a picture of an economy still running hot, defying predictions of a slowdown and challenging the narrative of an impending recession. This jobs report comes at a crucial juncture, as markets eagerly anticipate signs of moderation that justify the Fed's dovish pivot. Furthermore, the persistence of wage growth remains a key concern for policymakers, as while it supports economic growth in the short term, it also risks entrenching inflationary expectations. However, the sustained wage pressure suggests that the battle against inflation is far from over, potentially forcing the Fed to adjust its rate-cut trajectory. Consequently, equity markets, buoyed by hopes of a 'Goldilocks' scenario, will likely face headwinds as investors grapple with the implications of continued labour market strength.
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John Choong
Market Strategist at Interpretiv
November's NFPs data shows that the weakness seen last month was just a hurricane blip, and that the US labour market is resilient. The upward revisions to previous months' figures and robust private sector hiring paint a picture of an economy that's far from requiring a rapid rate-cutting cycle. And while the Fed has maintained a dovish tone recently, the strength we're seeing in the labour market, paired with stubborn pay and inflation metrics, suggests a more balanced risk scenario. The Fed needs to thread the needle carefully, as they can't afford to be premature with rate cuts if inflation remains sticky. Hence, we think markets are getting ahead of themselves by pricing in a 90% probability of a rate cut in two weeks. We believe next week's CPI data will be more crucial in determining the Fed's next move given the recent uptick in inflation. But until then, we expect some repricing of rate cut expectations, as the strength in today's data challenges the notion of a December cut.
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Prem Raja
Head of Trading Floor at Currencies 4 You
NFPs this month came out a lot hotter than expected, however this has been balanced by an uptick in unemployment, which isn't good news for the US economy. From the Fed's perspective I believe a 25bps cut was already baked in for this month and will give them enough evidence that this is still required, however the question does remain of whether more cuts are needed immediately. My view is that we may not get any more cuts until March 2025, as the Fed will want to let Trump's Presidency begin and let policies start doing their job, and also give December's cut room to work. The USD has weakened following this release with GBPUSD now trading at 1.28 and EURUSD trading above 1.06, both up around 0.3% each.