November's non-farm payrolls report came in at 266,000 jobs added which was well above expectations of 187,000. As a result, stocks moved up nearly 1% just shy of all-time highs on the S&P 500 index (SPY  ). Earlier in the week, stocks were lower on negative trade headlines, a weak ISM report, and an underwhelming ADP report. Thus, the jobs report was highly anticipated to provide more clarity on whether these data points were signaling that the trend of improving data the past couple of months was ending or if these created opportunities to bet on the primary trend.

Strong Payrolls Report

The strength of the jobs report should put these concerns to rest. The unemployment rate ticked lower to 3.5% which matches the lowest rate since 1969. Average hourly earnings increased 3.1% over the last year. This is a strong figure which portends positive things for consumer spending, but it's not so strong to be inflationary and risk the Fed getting hawkish.

One caveat to the jobs report is the effect of the General Motors strike ending which resulted in an increase of 41,300 jobs. Including GM (GM  ), the manufacturing sector added 55,000 jobs which is a striking difference from the ISM report showing a decline in manufacturing. In a positive sign, gains were spread across a variety of sectors including healthcare, hospitality and leisure, and retail. All these sectors posted strong gains following months of flat or negative job growth.

Another positive development was the October and September figures were revised higher. 13,000 jobs were added to September's count, and 28,000 to October. All in all, the strong jobs data confirms that the U.S. economy continues to expand despite weakness in manufacturing and global trade. The jobs report should also finally put the "looming recession" narrative to bed. In fact, the stock market's early optimism seems to be well-justified.

Impact on Federal Reserve

In the short-term, this report will have a mildly hawkish impact on the Federal Reserve, as it removes any possibility of another "insurance" rate cut. However, in the intermediate-term, there's no reason to believe this will have an impact on the Fed's current rate path which is basically to be in wait-and-see mode. It does seem more likely that the Fed's next challenge will be to deal with inflation rather than an economic slowdown.