The US labor market is poised for a significant rebound in November, following October’s storm-induced slowdown.
Economists are optimistic about a sharp recovery, with consensus estimates pointing to a net gain of 207,500 jobs.
The Bureau of Labor Statistics (BLS) will release its November jobs report at 8:30 a.m. ET on Friday.
This anticipated recovery contrasts sharply with October’s meager addition of just 12,000 jobs—the smallest increase in nearly four years.
Back-to-back hurricanes and a major labor strike were key contributors to the weak showing, which economists now view as an outlier.
Despite the turbulent month, the unemployment rate is expected to remain unchanged at 4.1%, consistent with levels seen since September.
Dan North, senior economist for Allianz Trade, noted the extraordinary circumstances of October. “I told my readers to essentially disregard last month’s report,” he told CNN.
“The BLS itself admitted that the hurricanes and strikes rendered the data inconclusive. A substantial bounce back in November is not just likely but rational,” he said.
November recovery reflects labor market resilience
November’s expected gains suggest a return to the labor market’s underlying strength.
Gus Faucher, chief economist at PNC Financial Services Group, predicts job growth of 250,000 positions for the month.
This figure points to a baseline monthly payroll increase of approximately 150,000 jobs, excluding the recovery from October’s anomalies.
“That’s a solid number,” Faucher told CNN. “It reflects a healthy labor market supporting income growth, which, in turn, drives consumer spending.”
Several indicators reinforce the view that the labor market remains robust.
Layoff activity has remained historically low, with unemployment claims trending downward in recent weeks.
The Job Openings and Labor Turnover Survey (JOLTS) for October showed a rise in job openings to 7.7 million, up from 7.4 million in September, surpassing economists’ expectations of 7.5 million.
Labor trends: Layoffs low, hiring steady
The labor market has shown resilience in the face of external pressures.
Layoff announcements for November totaled 57,727, a modest 3.8% increase from October, according to Challenger, Gray & Christmas.
Meanwhile, the layoffs and discharges rate remained at 1% in October—close to an all-time low.
“Overall, we still have a tight labor market,” said Faucher. “Employers are cautious about laying off workers, even if they are scaling back on new hires.”
First-time filings for unemployment benefits rose slightly last week, reaching a six-week high of 224,000.
However, continued claims for unemployment insurance, which reflect the number of people receiving benefits for a prolonged period, declined, suggesting no significant spike in joblessness.
Another positive sign is the increase in voluntary quits.
While the number of workers quitting their jobs rose by 228,000 in October to 3.3 million, it remains below year-ago levels.
This indicates that employees feel confident enough to seek better opportunities, a hallmark of a strong labor market.
Federal Reserve policy: Rate cuts likely to continue
Despite expectations of strong job growth in November, the Federal Reserve is unlikely to deviate from its current course of interest rate cuts.
Market participants are pricing in a 74% probability of a quarter-point rate reduction at the Fed’s December meeting, according to the CME FedWatch Tool.
Russ Brownback, head of global macro positioning at BlackRock, views the Fed’s current policy stance as restrictive.
“The real policy rate, after adjusting for inflation, is higher now than it was in mid-2023, even though inflation has significantly eased,” he explained.
The Fed’s preferred inflation gauge, the core personal consumption expenditures price index, showed a 2.8% year-over-year increase through October.
While this is below its 2022 peak, it remains above the central bank’s 2% target.
Fed Chair Jerome Powell acknowledged the balancing act during a recent appearance at The New York Times DealBook Summit.
“We’re not quite there on inflation,” Powell said. “But the economy is in very good shape, and we’re now on a path to bring rates back down to a more neutral level over time.”
Stock market strength and economic optimism
The strong labor market and resilient economy have buoyed investor sentiment.
Major stock indices, including the Dow Jones Industrial Average and S&P 500, reached record highs this week.
The S&P 500 has surged 27.6% year-to-date, driven by robust corporate earnings and consumer spending.
Yardeni Research has turned more optimistic about the labor market’s outlook.
The firm projects an average monthly job growth of 200,000 over the next quarter, citing improved hiring trends as the economy normalizes post-pandemic.
“We’ve argued all year that the labor market was recalibrating from the unsustainable hiring spree during the pandemic,” Yardeni Research noted in a recent report.
“Now, we see signs of renewed momentum.”
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