November non-farm payrolls in the United States confirmed that the labor market is cooling, reinforcing the logic for the Federal Reserve to cut interest rates.

According to data released by the US Bureau of Labor Statistics, the number of nonfarm payroll jobs increased by 64,000 in November, exceeding market expectations of a 50,000 increase. In October, the number of nonfarm payroll jobs decreased by 105,000, compared to expectations of a decrease of 25,000. The unemployment rate in November was 4.6%, higher than market expectations and the highest level since 2021. Due to the government shutdown, the Bureau of Labor Statistics was unable to collect the relevant data for October and therefore did not publish the unemployment rate for that month. The increase in employment in November was attributed to the healthcare, social assistance, construction, transportation and warehousing, and leisure and hospitality industries, while employment in the manufacturing industry has reached its lowest level since March 2022 a situation not favorable for the Trump administration. There is currently no indication that policies aimed at reshoring manufacturing will effectively drive employment growth. Additionally, average hourly wages have slowed down to the most moderate level since May 2021. Although the 3.5% increase is still higher than the inflation rate, it is lower than the expected 3.6%, indicating a slowdown in actual wage growth and lower than September's 3.8%, which does not help alleviate the cost of living for the public. Analysis indicates that this exacerbates the development of the K-shaped economy in the US, where consumer demand remains stable but increasingly polarized. Due to weakening consumer confidence, increased labor market vulnerability, and a widening gap between wage growth in low-income households and high-income households. The average employment growth for the past three months is currently 22,000 people. Even without considering Powell's adjustments, this number is lower than what most economists expect for the so-called "equilibrium rate". The "equilibrium rate" refers to the number of new labor force additions needed each month to meet the new demand in the labor market. Due to a decrease in the number of immigrants, this "equilibrium rate" has significantly decreased. Some economists estimate this ratio to be around 50,000 people, or even lower. However, the current number falls below this level, and most economists believe it is not enough to prevent an increase in the unemployment rate. Boston College economics professor Brian Bethune said, "The current situation is that businesses are reluctant to increase their workforce, but there won't be massive layoffs like during an economic recession. The simplest response when large companies face unexpected shocks is to stop hiring." The increase in employment in November, ending the downward trend from October, highlights the volatile trend in the labor market over the past few months. However, the unemployment rate continues to rise due to more layoffs, making it difficult for many unemployed Americans to find new jobs. Although these data have some limitations, the report will help investors get a reference for their expectations of interest rate trends next year. The Federal Reserve cut rates for the third consecutive time last week to support what Powell referred to as a "gradually cooling" labor market with "significant" downside risks. However, the dot plot shows significant differences among officials not only in last week's meeting decisions but also in future policy-making. The median forecast by officials signals one rate cut by 2026, while traders still expect two rate cuts. Market expectations for rate cuts slightly increased after the data was released. Yesterday, New York Fed President Williams - who accurately predicted the Fed's rate cut in December - said that he expects employment data to show that the labor market is "gradually cooling," which seems to be the case. It's not a massive recession, but the employment situation is definitely weakening: it can be seen from the rise in the unemployment rate, the decrease in employment numbers, and the slowing wage growth. Previously, Morgan Stanley strategist Michael Wilson stated that weak nonfarm payrolls will boost the US stock market. Wilson said in a report, "We are now clearly back to the 'good news is bad news/bad news is good news' situation." Following the release of the US nonfarm payroll data, US stock futures also rose slightly as expected. Nasdaq futures rose 0.13% intraday, S&P 500 futures rose 0.13%, and Dow futures rose 0.12%; the US Dollar Index dipped below the 98 level, now at 97.92, down 0.35% intraday. Spot gold rose slightly, up 0.14% intraday, at $4311 per ounce. The latest forecast from Citigroup strategists also shows that the S&P 500 index will rise by 12% to 7700 points by the end of 2026. The core support for this forecast is robust corporate profit growth and expectations of loose monetary policy. Citigroup strategist Scott Chronert said, "A Fed widely supportive of rate cuts is a key assumption in our forecast." However, the market still sees a low likelihood of another rate cut in January. According to the Chicago Mercantile Exchange's "FedWatch" data, the probability of this happening after the employment report stands at about 24.4%, unchanged from Monday. Kay Haigh, global head of fixed income and liquidity solutions at Goldman Sachs Asset Management, said, "Given the data interruptions, the Fed is unlikely to give too much weight to today's report. The report on December employment data (to be released in early January, before the next meeting) will be a more meaningful indicator for the Fed's decision on recent policy direction."