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What the November jobs report means for the Fed

Yahoo Finance’s Jennifer Schonberger joins the Live show to break down the November jobs report data and what it suggests for the Fed’s path ahead.

Video Transcript


JULIE HYMAN: Recapping the jobs numbers that we got just a little while ago, 263,000 jobs added to the US economy last month. That is much stronger than the 200,000 that was estimated. The unemployment rate back in line with estimates at 3.7%. And hot wage growth, 5.1% year-over-year.

Let's dig into this a little bit more. Also to talk about the implications for the Federal Reserve, Yahoo Finance's Jennifer Schonberger is joining us now with that. Good morning, Jen.

JENNIFER SCHONBERGER: Good morning, Julie. Yeah, was a stronger, hotter-than-expected jobs report of roughly 263,000 on the top line, that's roughly in line with where the job market stood in October when we knew that the Fed thought that the job market was strong at that point. So this jobs report likely to keep them on track, viewed as strong from the vantage point of the Federal Reserve.

Fed Chair Powell saying in his speech Wednesday, that the job market is still strong and probably too tight yet to bring down inflation. He suggested the economy only needs to add about 100,000 new jobs a month to keep pace with population growth.

He's also looking for wage growth to slow down and be consistent with 2% inflation. Of course, the job-- the Fed sees the job market is vital in the fight against inflation, and wants to see the labor market come into better balance to cool inflation.

So if we look at those numbers, kind of taking a deeper dive, 263,000 on the top number versus 200,000 expected. That's in line with the average growth over the past three months of 282,000. So we're not really seeing any cooling here.

The unemployment rate unchanged at 3.7%. Wage growth, very hot at 5.1% versus 4.6% expected. And remember, on Wednesday, Powell said, to be clear, strong wage growth is a good thing. But for wage growth to be sustainable, it needs to be consistent with 2% inflation. So he really wants to see wage growth around 2% to 3%.

Now, we also saw notable games-- gains in the sectors of leisure, hospitality, and health care, all services. And so the job market, which is especially important for inflation in core services ex-housing, still remaining hot right here. So all of these measures indicating across the board that the job market is still out of balance for the Fed.

All this said, Julie, the Fed still likely on track for a 50 basis point rate hike in less than two weeks. The Fed Chair says that the time to begin slowing down the pace of rate hikes could come as soon as December. And the reason for that is really risk management.

The Fed has been going at a 75 basis point pace for the past four meetings. And they don't want to crash the economy. They don't want to be overly aggressive. But they still want to bring inflation down, which is why 50 basis points probably still on the table, despite this hotter-than-expected jobs report. Back to you.