The latest employment report for November showed a complex economic picture, according to Macquarie. The report indicated an increase in payroll numbers by 227,000, which was partly a correction from the previous month’s distortions caused by strikes and severe weather. The underlying details of the report were seen as positive.
However, the household survey presented a less rosy scenario. The unemployment rate experienced a slight uptick from an unrounded 4.14% to 4.25%, a result of a reduction in household employment. The report suggested that the increase in unemployment could have been more pronounced if the labor participation rate had not declined.
A notable statistic is the employment-to-population ratio for individuals aged 25-54, which has decreased by 0.5 percentage points over the last two months.
The mixed findings from the November jobs report are expected to influence the Federal Reserve’s decision-making process. The central bank is predicted to implement a 25-basis point rate cut on December 18.
This move aligns with Macquarie’s Global Economic Outlook, which forecasts only one additional rate cut of 25 basis points in 2025, potentially adjusting the federal funds rate to a range between 4.0% and 4.25%.
The weakness highlighted in the household survey component of the report suggests that there may be a tilt towards the potential for more rate cuts than previously anticipated. Macquarie’s analysis indicates that the risks associated with the baseline forecast of the federal funds rate could lean towards a greater number of reductions.
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