Payrolls increased 227,000 in November, more than expected; unemployment rate at 4.2%

Job creation in November rebounded from a near-standstill the prior month as the effects of a significant labor strike and violent storms in the Southeast receded, the Bureau of Labor Statistics reported Friday.

Nonfarm payrolls increased by 227,000 for the month, compared with an upwardly revised 36,000 in October and the Dow Jones consensus estimate for 214,000. September's payroll count also was revised upward, to 255,000, up 32,000 from the prior estimate. October's number was held back by impacts from Hurricane Milton and the Boeing strike.

The unemployment rate edged higher to 4.2%, as expected. The jobless figure rose as the labor force participation rate nudged lower and the labor force itself declined. A broader measure that includes discouraged workers and those holding part-time jobs for economic reasons moved slightly higher to 7.8%.

The data likely gives the Federal Reserve a green light to lower interest rates later this month.

"The economy continues to produce a healthy amount of job and income gains, but a further increase in the unemployment rate tempers some of the shine in the labor market and gives the Fed what it needs to cut rates in December," said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management.

Job gains were focused in health care (54,000), leisure and hospitality (53,000), and government (33,000), sectors that have consistently led payroll growth for the past few years. Social assistance added 19,000 to the total.

At the same time, retail trade saw a decline of 28,000 heading into the holiday season. With Thanksgiving coming later than usual this year, some stores may have held off hiring.

Worker pay continued to rise, with average hourly earnings up 0.4% from a month ago and 4% on a 12-month basis. Both numbers were 0.1 percentage point above expectations.

Stock market futures edged higher after the report while Treasury yields were lower.

The report comes with questions over the state of the labor market and how that will impact Federal Reserve decisions on interest rates.

Traders accelerated their bets on a rate cut following the payrolls release, with market-implied odds rising above 88% for a quarter percentage point reduction. when central bank policymakers make their next decision on Dec. 18.

"Data this morning was a Thanksgiving buffet with payrolls spot on, revisions positive, but unemployment ticking higher despite the participation rate falling," said Lindsay Rosner, head of multi-service investing at Goldman Sachs Asset Management. "This print doesn't kill the holiday spirit and the Fed remains on track to deliver a cut in December."

Earlier this week, Fed Chair Jerome Powell said the generally strong state of the economy affords him and his colleagues the ability to be patient when making interest rate decisions. Other officials have said they see additional interest rate cuts as being likely but subject to changes in the economic data.

While inflation is well off the boil from its 40-year high in mid-2022, recent months have shown prices drifting up. At the same time, the October jobs report and various other reports have pointed to a labor market that is still growing but slowing.

The survey of households, which is used to calculate the unemployment rate, painted a similar picture as the establishment survey that provides the headline payrolls count.

According to the BLS, household employment rose by 174,000 on the month even as the labor force contracted by 193,000. The labor force participation rate, which measures the share of the working-age population either at work or looking for a job, declined to 62.5%, a decrease of 0.1 percentage point.

Full-time job holders decreased by 111,000 while part-time workers were off by 268,000.

The unemployment rate for Black workers jumped to 6.4%, an increase of 0.7 percentage point.