InvestmentNews reported on November 6 that the October jobs report came in above forecasts. Nonfarm payrolls rose by 165,000 and the unemployment rate fell to 4.1%, a result the outlet said put the prospect of another Federal Reserve rate increase back on the radar of financial advisors. The figures come from the Bureau of Labor Statistics release published the same day, as reported by several outlets.
Forecasts varied by outlet. Reuters consensus of about 65,000 jobs was cited by Coinpaper and Scotsman Guide, MPA cited 59,000, and Futu cited 70,000. Whichever benchmark is used, the gain was well above what economists had expected. MPA reported that August payrolls were revised up by 53,000 to 186,000 and September payrolls were revised up by 31,000 to 60,000. Average hourly earnings rose 0.4% for the month and 3.1% over the year, according to MPA, and the broader U-6 underemployment measure rose to 7.9% from 7.6%.
The report also showed continued slack among people looking for work. CNBC reported that about 2 million people were long-term unemployed, meaning out of work for 27 weeks or more, equal to 27.6% of all unemployed. Analytics Insight reported that median unemployment duration reached 11.9 weeks, the longest since November 2021, and that part-time work for economic reasons rose by 339,000 to 4.84 million. A BLS-based summary carried by ANI put labor force participation at 61.9%.
Rate expectations moved with the data. CME FedWatch put the probability of a quarter-point increase at the December meeting at 76.8% on November 6, up from 66.9% a week earlier, according to 247wallst. Analytics Insight reported that the Fed held its benchmark rate at 3.75% to 4.00% the prior week, that inflation was 3.7% year over year through September, and that third-quarter GDP grew at a 3.4% annual rate.
Commentators read the report in different ways. Seema Shah, chief global strategist at Principal Asset Management, told MPA that the report argues against fears of a meaningful slowdown. Kathy Bostjancic, chief economist at Nationwide, said the hiring figures supported her expectation of a December increase, according to Analytics Insight.
For advisors, the practical question is how a higher policy rate path affects client portfolios. In general, bond prices fall when yields rise, so rate-hike expectations bear on fixed income valuations and on conversations about duration. Cash and money market yields tend to move with the policy rate, which can change the case for holding short-term reserves. Advisors may also see more client questions about whether a further increase would slow borrowing and spending.
What comes next depends on the Fed's December decision and the inflation data that follows. The outlets covering the report did not agree on the date of the December policy meeting, so advisors should confirm it against the Fed's published calendar before relying on any specific day. The market odds cited here will also shift as new data arrives.