US jobs data set to bolster Federal Reserve’s higher-for-longer interest rates strategy

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

US businesses are expected to have added 187,000 jobs in November, a rise on October and another sign of labour market strength that will bolster Federal Reserve officials’ view that interest rates will need to remain high for some time yet.

The expected non-farm payrolls figure, based on a Bloomberg poll of economists, would mark a rise from 150,000 in October. The US unemployment rate is expected to remain flat at 3.9 per cent.

The Bureau of Labor Statistics will release its data at 8.30am Eastern Time on Friday.

While markets are betting the Federal Reserve will start cutting interest rates from their current target range of 5.25 per cent to 5.5 per cent before the middle of the year, central bank officials say cuts remain off the agenda.

One of the big reasons why is the labour market has remained resilient despite the Fed having raised rates by 525 basis points since early 2022 in an attempt to quell rampant inflation.

Fed chair Jay Powell last week said labour market conditions “remain very strong” despite job openings slowing to a more “sustainable” level. Rate-setters want to see more signs that their restrictive monetary policies are finally beginning to dent wage growth to levels consistent with their goal of keeping inflation steady at 2 per cent.

Stephen Stanley, chief US economist at Santander Bank, said: “If you go back to the beginning of this year, the consensus view was that we’d be looking at negative payrolls by the spring. Jobs growth has slowed, but it’s been much more moderate than expected. Even now the numbers are pretty solid.”

The November labour market figures are expected to show wages rose 0.3 per cent month on month, and at an annual rate of 4 per cent.

“We expect [annual wage growth] to come in somewhere in the high 3 to 4 per cent range,” said Andrew Patterson, senior international economist at Vanguard, an investment manager. “That’s still too high for the Fed’s comfort level.”

Rate-setters on the Federal Open Market Committee convene in Washington next week, with a policy announcement due on Wednesday afternoon. Rates are forecast to stay on hold.

Leading academic economists polled by the Financial Times believe the Fed will not cut rates until the second half of next year. However, markets are pricing in cuts sooner, with some traders expecting a marked weakening in the jobs market in the coming months to force the central bank to being lowering borrowing costs as soon as March.

The resolution of major strikes in the automotive industry and for screenwriters is expected to have provided some of last month’s jobs lift.

Some economists expect the detail of the November figures to show some weakening in labour conditions, with the number of workers forced into part-time employment for economic reasons ticking up.