- Economists expect the economy was strong in November, with employers adding 573,000 nonfarm payrolls, according to Dow Jones.
- Investors will be watching the employment data, released Friday morning, with an eye on how the Federal Reserve will interpret it when it meets in mid-December.
- Wages were expected to continue rising at a rapid pace in November, gaining 5% year-over-year, according to Dow Jones.
Job growth is expected to have been strong in November, and employers likely continued to boost wages to attract and retain workers in an incredibly tight labor market.
Economists expect 573,000 jobs were created last month, up from 531,000 in October, according to Dow Jones. The unemployment rate is expected to have declined to 4.5% from 4.6%, and average hourly wages are expected to have increased by 0.4% on a monthly basis, or 5% year over year.
"It looks like it was a really good month, and we'll see if we can sustain it, with some pullback, which is natural with concerns about omicron," said Diane Swonk, chief economist at Grant Thornton. "But at the moment, we're still coming off what was an incredible month, especially for travel and tourism."
The jobs data, expected Friday at 8:30 a.m. ET, will be an important input for the Federal Reserve at its Dec. 14 and 15 meeting. Earlier this week, Fed Chairman Jerome Powell said the central bank could speed up the tapering of its $120 billion a month bond-buying program, which it put in place to prop up the economy during the pandemic. The Fed will discuss the acceleration at its December meeting, he said.
Full employment is one of the Fed's dual mandates, so economists will be closely watching the participation rate in the November report to see if it rises. This metric is the percentage of the eligible workforce that is employed or actively seeking work, and it was 61.6% in October.
Swonk expects an above-consensus 750,000 jobs were added in November, and she expects the unemployment rate fell to 4.4%. Swonk said wage growth should be solid, as employers attempt to attract workers in the face of demand from Amazon and other employers that have raised wages.
"It's a hot job market and there's a surge in demand that's like nothing we've ever seen," she said. She noted that job openings are up 55% from the February 2020 level, according to the online jobs site Indeed.
"There's no immigration. It's fallen off a cliff. The pandemic has accelerated retirements and hurt participation among some groups that normally need to participate the most," she said. "It's far from perfect. It's a job market that has a collision of demand surging with constraints on supply."
Wage gains were likely across the board in November. "We'll see gains on the low end, but the higher end, professional services, is really hot," Swonk said.
Luke Tilley, chief economist at Wilmington Trust, expects 300,000 jobs were created in November, based on private sector data and the weekly unemployment claims data.
He expects the hiring trend is strong and will remain so.
"Our expectation is 500,000 jobs per month on average over 12 months going forward, but there's going to be fluctuations, with the virus and ups and downs of different industries," said Tilley.
Tilley said the Fed will be looking for the reasons behind the jobs report's weakness or strength, as it tries to assess what will be normal for the labor market post-pandemic. "If it's weak because there's still no labor supply, that's very different for them than weakness because demand is petering out," he said. "I think the Fed, the FOMC, is probably spending more time getting their arms around what does a full recovery of the labor market mean."
He said the Fed will have to adjust to a lower participation rate. "That has implications for the unemployment rate and should we even be comparing it to the pre-pandemic unemployment rate," he said.
But the jobs report will also be judged by investors, with an eye on what it means for Fed policy. Financial markets have been sensitive to any nuances that could help determine the central bank's timeline on completing its bond-buying program, which now is expected to end in June 2022.
Once the bond purchases end, the door would be open for the Fed to raise interest rate hikes.
Swonk has been expecting the Fed to speed up the tapering of its bond purchases because of higher than expected inflation, so the wage portion of the employment report will also be very important. "We're not getting a wage price spiral...but that is what the Fed is worried we could get to," she said.
David Petrosinelli, senior trader at InspereX, said the jobs report will not likely have a big impact on the market unless it is very strong or very weak.
"I think this market is much more cued up for a stronger number, and that tells me rates have some room to run," he said. Petrosinelli pointed to the yield on the benchmark 10-year Treasury, at 1.44% Thursday afternoon. Yields move opposite price.
"You can look back to last week and that was 1.70%," he said, referring to the 10-year yield. "I think that was the upper bound there. If you get a really strong number, we could go right back there, albeit bounded by the sideshow of this new variant."
Yields moved sharply lower after initial reports of the omicron variant of Covid last Friday.