U.S. employers added a paltry 210,000 jobs in November, sharply below consensus forecasts of 550,000, with the underwhelming job creation numbers initially leading Wall Street stock futures to jump in early trading as investors bet it would lead the Fed to slow down with scaling back stimulus, but those hopes faded later in the day as expectations firmed that the Fed would continue with a faster taper to tame inflation, and stocks sank.
The unemployment rate fell 0.4 percentage points to 4.2 percent, a 21-month low, while the total number of unemployed persons fell by 542,000 to 6.9 million.
The labor force participation rate, a measure of people working or actively looking for work, edged up 0.2 percentage points to 61.8 percent, the report also showed. While that’s an improvement over October’s rate, it remains a historically depressed level. In February 2020, the labor force participation rate stood at 63.6 percent, with a historical peak of 67.3 percent in April 2000.
“Labor force participation rose, a welcome sign,” Bankrate Senior Economic Analyst Mark Hamrick told The Epoch Times in an emailed statement. “Wage growth remains solid with a year-over-year gain of 4.8 percent, while mindful that inflation has been running hot.”
Surging inflation and signs of continued labor market recovery have put pressure on Fed policymakers to accelerate their schedule for scaling back, or tapering, the central bank’s $120 billion in monthly purchases of U.S. Treasury and mortgage-backed securities.
Federal Reserve Chair Jerome Powell in recent testimony suggested a faster taper than the $15 billion per month reduction that’s currently in place, while acknowledging that it’s time to “retire” the term “transitory” as a description of the current bout of inflation, which hit a 31-year high in the 12 months through October and rose at a faster pace than in September.
Goldman Sachs recently predicted that the persistence of inflationary pressures will force the Fed to double the pace of the taper to $30 billion per month starting in January, which would bring the timeline forward to mid-March.
Market analysts said ahead of the release of the Labor Department report that a strong job creation number could reignite investor concerns for a faster timetable for the Federal Reserve to phase out its massive bond-buying program, which the central bank is currently poised to do over eight months.
“Assuming the Omicron news remains less end of the world, a print above 550,000 jobs should see the faster Fed-taper trade reassert itself,” Jeffrey Halley, senior market analyst at Oanda, told Reuters.
“That may nip the equity rally in the bud, while the U.S. dollar and U.S. yields could resume rising,” he added.
The Labor Department’s below-expectations job creation number met with early enthusiasm on Wall Street, with U.S. stock futures spiking on the news. But after opening bell, the Dow Jones, S&P 500, and Nasdaq all fell, taking their respective futures indexes down with them. By around 3 p.m. New York time, the tech-heavy Nasdaq was down around 2.5 percent, as investors reacted to headlines of Fed officials suggesting that the jobs numbers weren’t bad enough to push the central bank into a slower taper.
Equity markets flitted between gains and losses all week as investors digested updates on the newly detected Omicron variant, which is spreading globally and leading many countries to reimpose travel restrictions.
“The emergence of the new COVID-19 variant has supplied a new and unwelcome source of uncertainty for the economy. That will be more relevant for the December jobs report a month away,” Hamrick said.