Signs of cooling in the U.S. labor market have begun to surface, leaving investors eagerly awaiting the official November jobs report set to release at 8:30 a.m. ET Friday.
This pivotal report comes just ahead of the critical Federal Open Market Committee meeting next week, adding to the high stakes for investors and policymakers alike.
Alarm bells started ringing with data releases this week showing weaker-than-expected figures on the labor market front. Job openings saw a drop from 9.35 million in September to 8.733 million in October, causing concerns among market participants about weakening labor market conditions.
ADP reported a modest growth of 103,000 in private employment in November, slightly down from October's 106,000, and well below the expected 130,000.
"The boost is behind us," said Nela Richardson, chief economist at ADP.
The economy, as a whole, may witness more moderate hiring and wage growth in 2024, she said.
Some sectors showed resilience, with trade, transportation and utilities adding 55,000 jobs and education and health services contributing 44,000. In contrast, professional and business services, as well as leisure and hospitality, experienced declines of 5,000 and 7,000, respectively.
November Jobs Report: What Are Economists Expecting?
- Economists are predicting non-farm payrolls will rise to 180,000 in November, an increase from October's 150,000, although these predictions preceded this week's economic data releases.
- The unemployment rate is expected to hold steady at 3.9%.
- Average hourly earnings are projected to advance by 0.3%, a slight acceleration from October's 0.2% monthly growth. On an annual basis, earnings are forecasted to dip slightly from 4.1% to 4%.
A jobs report that falls below expectations is likely to fuel speculation about Federal Reserve rate cuts in 2024. The market is pricing in a 61% chance of rate cuts beginning in March 2024, with a 70% probability of up to five rate cuts by December 2024.
On Nov. 3, an October jobs report that came in cooler than expected led to a 1.1% daily surge in the tech-heavy Invesco QQQ Trust
Conversely, a stronger-than-predicted jobs report could act as a damper on the market's overextended expectations for Fed rate cuts in 2024.
Depending on the extent of the positive surprises, a tight labor market might provide the Fed with enough justification to maintain higher interest rates for a longer period.
This could potentially disappoint market expectations of rate cuts in the coming year, which would be viewed as a negative factor for interest-sensitive assets.
