Despite the Fed's aggressive efforts to cool the U.S. labor market and tame inflation, job growth once again came in higher than expected last month. According to the latest jobs report, published by the Bureau of Labor Statistics on Friday, employers added 263,000 nonfarm payrolls in November versus economists' expectations of 200,000 new jobs. Total nonfarm employment in the U.S. climbed to 153.5 million in November, exceeding the pre-pandemic high of 152.5 million by one million jobs. Wages also grew faster than expected last month, further dimming hopes of the Fed taking a less hawkish stance anytime soon.
Markets initially fell in response to the hotter-than-expected jobs report, before regaining most of the losses in a roller coaster session on Friday. The S&P 500 ended the day with a drop of just 0.1 percent, a relatively muted response compared to previous strong jobs reports.
It’s a weird situation created by the inflation crisis: while normally picking up on good news, Wall Street is now desperately hoping for signs of a slowing economy/labor market, because anything signaling a slowdown increases the chances of the Fed pivoting to less aggressive rate hikes going forward.
As its stands ahead of next week's FOMC meeting, markets are expecting another 50 point hike to bring the year's total increase to 450 basis points. The CME FedWatch Tool puts the likelihood of such a hike at 79.4 percent, while the probability of another 75 point hike stands at 20.6 percent as of December 5.