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What you need to know
- According to forecasters, U.S. businesses likely added more than 200,000 jobs during November, up from 12,000 positions in October.
- The uptick, if accurate, would be a return to normal after a decline caused by Hurricanes Milton and Helene.
- The job situation could heavily influence Federal Reserve officials' decision at their next meeting in December, where they must decide whether to cut the central bank's benchmark interest rate.
- Fed officials may be less inclined to reduce rates if employers are hiring faster than expected.
Forecasters believe that U.S. businesses likely increased the hiring rate in November. This is a rebound from an October slump due to hurricanes.
According to Dow Jones Newswires’ and The Wall Street Journal’s survey of economists, a report from the Bureau of Labor Statistics, expected to be released on Friday, the economy likely added 214,000 new jobs in November. This is up from only 12,000 positions in October. The pace of growth in jobs would mark a return back to normalcy, a full month after Hurricanes Helene and Milton had pushed the job creation rate to its lowest point in over three years.
Forecasters predict that the unemployment rate will remain at 4,1% which is historically low.
What can the Jobs Report mean to the Fed?
The trajectory of the labor market and the unemployment rate in November could have a larger-than-usual impact on the Federal Reserve's policy decision at its upcoming meeting later in December. Officials will decide whether to lower the central bank's benchmark interest rate.
A slower-than-anticipated job growth, or higher levels of unemployment may cement the expectation in financial markets for a Fed rate cut. This will put downward pressure on all types of borrowing costs. A hotter job market may also encourage the Fed to maintain higher interest rates for longer.
“This week’s labor market data will likely be a critical factor in the deliberations a few weeks from now,” Brett Ryan, senior U.S. economist at Deutsche Bank, wrote in a commentary.
Recent economic data like the job report have been pushing the Fed into different directions. They want to keep the rates high but keep inflation at a low enough rate to achieve its 2% goal. But they don’t want them to be so high that it causes a downturn in business and increases unemployment.
After more than a decade of holding the Fed Funds rate to a record high, it was only in September that policymakers decided to cut by 50 basis points. This helped prevent an economic slowdown. In November, they cut it by another 25 basis points.
Since then, inflation has been more stubborn than expected, and employers have pulled back on job openings. The employers have also avoided a massive increase in layoffs.
It is believed that the fed funds rate has a direct correlation with job creation, as lower borrowing costs encourage more businesses and allow employers to easily raise capital to hire employees. The fed funds rate is closely related to small business funding.
Update, 6 December 2024. The article was updated using the latest economic forecasts.
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