MNI US Employment Insight: Soft Enough To Keep Fed Cutting

Executive Summary

• The payrolls report was very close to expectations for November alone, rising 227k vs consensus 220k and a primary dealer analyst median of 225k.
• Two-month revisions were at least positive at +56k after the heavy -112k revisions in the October report, but only +24k of that upward revision came in October which could have underwhelmed expectations.
• The average of the last two months as a crude estimate of underlying trend sees nonfarm payrolls growth of 132k and private at 96k.
• A dovish angle can be made as the seasonal factors were particularly beneficial again this month. By our calculations, October would have seen -50k vs +36k if the Oct’23 factor was used instead of Oct’24, whilst November would have seen +147k vs +227k on the same basis.
• The household survey was clearly weaker than the establishment survey, with obvious signs of softness/ loosening in labor market conditions. The unemployment rate increased to a 4-month high at 4.246% (+0.1pp, cons 4.15%) and the U-6 rate also ticked up 0.1pp to a 4-month high 7.8%.
• The prime age category drove this increase, rising from 3.53% to 3.68% by our calculations to nudge above 3.65% in July for technically its highest since Nov 2021.
• Whilst the unemployment rate was more dovish than expected, the data leave it continuing to track below the 4.4% the median FOMC member forecast for Q4 back in the September SEP. In Governor Bowman’s words post-data release, the unemployment rate remains at a historically low level.
• Indeed, averaging 4.20% in Oct-Nov, it’s currently only just meeting the lowest estimates (from presumably the most hawkish FOMC members) with an entire FOMC range of 4.2-4.5%.
• Nevertheless, there don’t look to be enough signs of strength here to warrant a pause later this month and accordingly Fed Funds futures has jumped to pricing 22bp of cuts vs 18bp prior. CPI will have to be extremely strong on Wednesday to see a pause back on the table along with a blackout period steer. 

PLEASE FIND THE FULL REPORT ATTACHED HERE: USEmploymentReportDec2024.pdf