Solid November jobs report may slow Fed easing in 2025. A December rate cut's still likely

November’s jobs report came in largely as expected, resulting in no significant repricing of Federal Reserve expectations in 2025, said Jack McIntyre, portfolio manager at the $63 billion Brandywine Global Investment Management.

“It allows (the Fed) to ease this month," he said. However, McIntyre cautions that next week’s CPI report “will be more impactful as inflation is back to being the critical variable.”

The Fed will shift to a “more patient tone, think slow and steady, as there is no pressure for them to increase the scale of monetary easing going into 2025.”

The November jobs report helps alleviate fears from a few months ago that the labor market was softening and that steep rate cuts were needed, said Glen Smith, chief investment officer at GDS Wealth Management, with $1.2 billion in assets under management.

“The labor market is indeed strong and while the Federal Reserve will still likely cut interest rates in December, we take the Fed at its word in telegraphing a more patient stance on rates for 2025,” Smith said.

Lindsay Rosner, head of multi-sector investing at Goldman Sachs Asset Management, described the recent jobs data as a “Thanksgiving buffet” with “payrolls spot on, revisions positive, but unemployment ticking higher despite the participation rate falling.”

The jobs report “doesn't kill the holiday spirit,” she said, and added that the Fed “remains on track to deliver a cut in December.” GSAM has $3.1 trillion in assets under supervision.

The U.S. economy created 227,000 jobs in November, far above the upwardly revised figure of 36,000 figure from October, and above economists’ expectations, the U.S. Bureau of Labor Statistics reported on Dec. 6.

The unemployment rate clocked in at 4.2%, just above the 4.1% figure from the prior month.

Economists had expected an increase of 207,500 jobs in November and a jobless rate of 4.1%, according to a survey by FactSet Research Systems, a financial data firm.

The November payroll figure also came ahead of the average monthly gain of 186,000 jobs over the prior 12 months, the Bureau said.

The Bureau also revised upward payroll figures from the past two months -- the September figure was revised up by 32,000 to 255,000, while the October data was revised up by 24,000 to 36,000. With these revisions, employment in September and 0ctober combined was 56,000 higher than previously reported.

In November, job gains were especially pronounced in the health care, leisure and hospitality, government, and social assistance sectors, the Bureau added in the release. However, the retail sector lost jobs.

Fed futures trading are predicting a rate cut at the next meeting on Dec. 18.

As of the morning of Dec. 6, according to CME Group's FedWatch tool, market participants' pricing of fed fund futures indicated there is a 87.1% probability that the central bank will cut rates by 25 basis points at the next meeting, and a 12.9% probability the Fed will hold rates steady.

The Fed’s key short-term interest rate is currently in a range of between 4.5% to 4.75%, after the central bank reduced rates by 25 basis points at the Nov. 7 meeting.

Adam Hetts, global head of multi-asset and a portfolio manager at the $382 billion Janus Henderson Investors, commented that the “trend of a slowly slowing labor market continues to encourage rate cuts while not overly threatening the late-cycle economy.”

Noting that the stock market is trading at “record highs” as the market continues to celebrate the “post-election certainty,” Smith of GDS still thinks the bull market has “more room to run, albeit with volatility that is par for the course in investing.”