US non-farm payrolls saw a surprising miss at just 210,000 in November, much worse than the 550,000 gain forecast.
Confusingly with this miss, the unemployment rate was recorded at 4.2%, much better than the 4.5% estimated, with the participation rate rising. With stimulus checks now a distant memory and savings built up during the pandemic being tapped into, it would have seemed obvious that the desire to return to paid employment for many is now more of a necessity. However, it appears that not as many people are returning to work as expected and / or the jobs market is now structurally very tight in this pandemic-induced new economy.
The employment report, released on 3 December, cannot fully justify the Federal Reserve’s hawkish tilt, as seen from Jerome Powell at the end of November when he stated that tapering may need to be done more quickly and be completed by March 2022. The new Covid-19 Omicron variant, which has yet to fully establish itself in the US, is still the real unknown variable in relation to the pace of the jobs recovery. Until the scientific community works out whether the Omicron variant is more virulent and / or more resistant to the current vaccines, we expect the market reaction to be muted. However, the latest jobs report was important to the market’s sense of when rates will start to rise. This weak reading shifts the narrative of the first hike coming earlier next year to perhaps a bit later now – if there’s a silver lining to this report, it’s probably that, boosting risk-on sentiment in the short term.
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