After a period of rapid hiring, the strong U.S. labor market seems to be settling down. The eagerly awaited November jobs report, set to be released on Friday morning, will shed light on the current state of employment in the country. Here are some key details to watch out for:

Expected Job Growth

Economists surveyed by the Wall Street Journal predict that the U.S. will add a solid 190,000 jobs in November, following a 150,000 gain in the previous month. Despite concerns about an economic slowdown, there are reasons for this increase. The return of striking Hollywood and United Auto Union workers will contribute up to 50,000 jobs to the overall number. Additionally, government employment has risen sharply.

While this expected growth falls below the average monthly gain of 239,000 seen so far this year, it is still considered to be too fast for the Federal Reserve.

Federal Reserve's Ideal Scenario

Federal Reserve Chair Jerome Powell and his colleagues ideally want to witness a decrease in demand for workers to around 100,000 jobs per month. This figure aligns with the typical growth of the labor force and helps to avoid upward pressure on worker pay and inflation.

There are indications that hiring has already slowed down, as suggested by other labor market indicators such as the ADP jobs report and U.S. job openings.

Market Reaction

The previous jobs report led to a rally in the S&P 500, with an increase of around 5%. Additionally, the yield on the 10-year Treasury note fell from approximately 4.6% to 4.15%, reflecting rising expectations for a series of rate cuts in 2024. It's important to note that yields and debt prices move in opposite directions.

Given this market response, investors are likely to be more sensitive to a higher-than-expected jobs number than a lower one. Tom Essaye, founder of Sevens Report Research, emphasized in a recent note that there is now a lower threshold for figures that are considered "too hot." This includes not only payrolls, but also the unemployment rate and wages. Higher-than-expected numbers could potentially cause a pullback in both stocks and bonds, since the market has already priced in a dovish Federal Reserve.

In conclusion, the upcoming November jobs report will provide valuable insights into the state of the U.S. labor market. Investors and economists will closely analyze the figures to assess the impact on both stocks and bonds.

Unemployment Rate

Economists polled by the Wall Street Journal expect the jobless rate to remain unchanged at 3.9%.

The jobless rate has crept up from 3.5% in July, but it’s not entirely a negative sign.

More Workers Entering the Labor Force

Some of the uptick reflects an increase in the number of workers who were laid off, but more people are also entering the labor force in search of work because jobs are easier to find. Most individuals do not find jobs right away and they are counted as unemployed.

If the rate keeps rising, however, it would likely be the result of businesses cutting jobs in anticipation of tougher times ahead.

Hourly Pay

Average hourly wages are expected to accelerate slightly and rise 0.3% in November, according to the Journal survey.

That’s also a bit higher than the Fed would like.

Desired Wage Growth

The central bank would prefer smaller increases of 0.1% to 0.2% per month to return wage growth to pre-pandemic levels of 3% or less.

The increase in pay in the 12 months ended in November is also seen dipping to 4% from 4.1% in the prior month and almost 6% in the spring of 2022.

Shortly before the pandemic, wages were rising about 3.5% annually. Yet they rose an average of less than 3% annually from 2010 to 2018, when inflation was extremely low.

Hours Worked

Businesses trim the number of hours employees work — especially in service jobs like retail and hospitality— before resorting to layoffs when the economy slows. And they’ve been starting to do that.

Decrease in Working Hours

The number of hours worked by the typical employee matched a three-year low of 34.3 hours in October, but it’s likely to get a bump up from the end of the UAW strike.

It would be a warning sign for the economy if the number dropped below 34 hours.

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