Fed should 'lowball' rate cuts expectations next week says analysts after strong jobs data
In November, nonfarm payrolls in the U.S. rose by a seasonally adjusted 199,000, surpassing the Dow Jones estimate of 190,000 and outpacing the October gain of 150,000.
The unemployment rate also saw improvement, declining to 3.7%, beating the forecasted 3.9%, with a slight increase in the labor force participation rate.
Average hourly earnings, a significant inflation indicator, increased by 0.4% for the month and 4% from a year ago, aligning with expectations.
The report “challenges what we view as excessive speculation on a rate cut as early as March and will encourage Fed officials to lowball their own estimates of cuts in 24 in the new Summary of Economic Projections released next week,” analysts at Evercore ISI said.
The health care sector showed the most significant growth, adding 77,000 jobs, while other notable gainers included government (49,000), manufacturing (28,000), and leisure and hospitality (40,000).
“We double down on our Fed preview released earlier this week which warned that the Fed is likely to drag its heels on rate cuts reflecting a desire to see more evidence of the economy stepping down to sub-potential growth on a sustained basis and prevent further rapid easing of financial conditions in the interim,” the analysts added.
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