NEW YORK, Dec 16 (Reuters) - The pace of U.S. job growth rebounded in November after a drop in the prior month, but the unemployment rate increased to 4.6%, indicating the labor market continues to show signs of softening, while expectations the Federal Reserve was unlikely to cut rates in January remained largely unchanged.
Nonfarm payrolls increased by 64,000 jobs in November, after a drop of 105,000 in October as more than 150,000 federal employees who took deferred buyouts departed, Labor Department
data showed on Tuesday. Economists polled by Reuters had forecast 50,000 jobs added last month.
The unemployment rate was 4.4% in September.
A separate report from the Commerce Department showed retail sales were flat in October, just below the estimate of economists polled by Reuters calling for a rise of 0.1% and followed a downwardly revised 0.1% gain in September.
Both reports were delayed by the 43-day government shutdown.
MARKET REACTION:
STOCKS: S&P E-minis initially moved slightly higher before reversing course and were last down 9 points, or 0.13%
BONDS: Treasury yields briefly moved lower before paring declines, with the yield on the benchmark U.S. 10-year note
FOREX: The dollar index extended declines before paring its drop and was last down 0.1% at 98.16
COMMENTS:
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN:
"The nonfarm payroll data drought is over, but the data show the labor market was a barren wasteland basically since April. The more recent data from ADP indicates the labor market may have turned a corner in mid-November, though. In October, the DOGE effect was in full effect with a drop in government employment of 162,000. All the employees who accepted a deferred resignation fell off the payrolls then, so they were on the payrolls, but not working up to that point.
"The more dovish members of the Fed might feel a little vindicated as the unemployment rate has moved up to 4.6%, which is at the high-end of the participants’ guesses of where it would end this year. A January cut may not be likely, but a March cut can’t be ruled out.
"In October, private sector payrolls expanded by 52,000, but we all know that because of the benchmark revisions announced back in August that the real number is probably closer to -5,000. Despite that, retail sales held up pretty well in October. Consumers will do what they do best, which is consume, even in the face of job market uncertainty.
"October and November could be the inflection point for the labor market to emerge from the rough patch and to start getting some traction in 2026. The labor market lags GDP, so cap-ex spending and profit growth can help pull the labor market along."
PETER ANDERSEN, FOUNDER, ANDERSEN CAPITAL MANAGEMENT, BOSTON:
"Investors were looking for no surprises, something that would have some variability but nothing material.
"When the unemployment rate moves up at all like this, it does fuel the potential for continued rate cuts. But as we've seen in the past, this is not a consistent trend.
"We are now seeing some dissension in the Fed committee. There are people that were against lowering the most recent rate cut and also there's now considerable focus on who is going to lead the Fed. So right now the Fed is at most distracted as it possibly could be, and I don't think that there will be any major movement decisions until all that resolves."
KAY HAIGH, GLOBAL CO-HEAD FIXED INCOME AND LIQUIDITY SOLUTIONS, GOLDMAN SACHS ASSET MANAGEMENT, NEW YORK (via email):
"The Fed is unlikely to put much weight on today’s report given data disruptions. Chair Powell commented last week that the report would likely be affected by shutdown-related distortions, making it a less reliable gauge of the labor market’s health than usual. The report on December’s employment data, released in early January ahead of the next meeting, will likely be a much more meaningful indicator for the Fed when it comes to deciding the near-term policy trajectory."
SEEMA SHAH, CHIEF GLOBAL STRATEGIST, PRINCIPAL GLOBAL INVESTORS, LONDON (via email):
" (Fed Chair) Powell is likely to view today’s jobs data with a fair degree of skepticism. Not only are there likely to be some data distortions, but tighter immigration policies mean the headline November payroll figure should not be taken at face value - the labor market is not as weak as those numbers might initially suggest. That said, the larger-than-expected rise in the unemployment rate will still trigger some creeping concern within the Fed.
"The labor market is cooling - probably not sharply, but enough to warrant some additional monetary easing and, at the very least, a move towards neutral policy rates. The Fed may prefer to see further evidence of economic weakness before its next cut, but based on today’s data, more rate reductions are likely next year than the single cut currently pencilled into the dot plot."
(Compiled by the Global Finance & Markets Breaking News team)
