Job growth tops expectations in November, retail sales unchanged in October

NEW YORK, Dec 16 (Reuters) - The pace of U.S. job growth rebounded in November after a drop in the prior month, but the unemployment rate increased to 4.6%, indicating the labor market continues to show signs of softening, while expectations the Federal Reserve was unlikely to cut rates in January remained largely unchanged.

Nonfarm payrolls increased by 64,000 jobs in November, after a drop of 105,000 in October as more than 150,000 federal employees who took deferred buyouts departed, Labor Department data showed on Tuesday. Economists polled by Reuters had forecast 50,000 jobs added last month.

The unemployment rate was 4.4% in September.

A separate report from the Commerce Department showed retail sales were flat in October, just below the estimate of economists polled by Reuters calling for a rise of 0.1% and followed a downwardly revised 0.1% gain in September.

Both reports were delayed by the 43-day government shutdown.

MARKET REACTION:

STOCKS: S&P E-minis initially moved slightly higher before reversing course and were last down 7.75 points, or 0.11%?

BONDS: Treasury yields briefly moved lower before erasing declines, with the yield on the benchmark U.S. 10-year note up 1 basis point to?4.182%

FOREX: The dollar index extended declines before paring its drop and was last down 0.17% at 98.10

COMMENTS:

WILL COMPERNOLLE, MACRO STRATEGIST, FHN FINANCIAL, CHICAGO;

"I don't think there's much signal we can get from today, and I think the bond market agrees with me so far. The most important thing I would say is the rise in the unemployment rate to 4.6%. But even there, if you look at the BLS report they have a technical note that says for a number of reasons the margin of error for November is higher. And because this is a low 4.6%... ?you could take a rosier view and say it's not all that different from 4.5%. And that has been the median projected unemployment rate for the end of 2025 for the last three SEPs.

"It looks like the labor market is still gradually cooling rather than showing an acceleration in deterioration. So, I don't think this data overall changes our understanding of how the economy is doing or how the Fed is going to react to it."

KIM FORREST, CHIEF INVESTMENT OFFICER, BOKEH CAPITAL PARTNERS, PITTSBURGH:

"A lot of the data that came out points to this not terrible economy - it's not great, but it's not terrible. The government shutdown greatly affected the data, but it looks like the private sector is holding up.?

"The rise in salaries isn't that great either. So, a lot of this points to better than feared numbers. Still not strong, but at this point in the cycle, especially given the government shutdown, that consumer spending didn't decline as much as feared. Layoffs weren't as much as feared, and the economy is still chugging along in some respects and I think that's good enough for the S&P 500 and the other indexes to finish out the year relatively strong, all things considered.

"We needed this data just to see especially consumer sales or retail sales, that's really kind of important. We don't have a whole lot of companies telling us what's going on. At least the more consumer-oriented companies, they're right in the thick of doing holiday selling, so they can't really tell us. And we needed to know how that consumer is doing. And I think that's one of the not only bright spots, but important data elements that we're getting today."

JAMIE COX MANAGING PARTNER, HARRIS FINANCIAL GROUP, RICHMOND, VIRGINIA (via email):

"The jobs data show further evidence that the Federal Reserve is behind the curve and will need to reduce rates again in January. ?Try as they might to sell the purchase of short-term Treasuries as not QE, it clearly was and needed to be."

ADAM HETTS, HEAD OF MULTI-ASSET INVESTING, JANUS HENDERSON, DENVER (via email):

"November NFP at +64k, slightly above +50k consensus, continues the general downtrend in job growth without signaling new recession risks. This print alone shouldn't meaningfully shift expectations for the path of Fed cuts, nor is it low enough to create new downward pressure on risk assets. While October NFP was much lower, at -105k, government payrolls were the discorporate contributor, as widely expected, and private payrolls stayed positive which makes the October headline less concerning."

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN:

"The nonfarm payroll data drought is over, but the data show the labor market was a barren wasteland basically since April. The more recent data from ADP indicates the labor market may have turned a corner in mid-November, though. In October, the DOGE effect was in full effect with a drop in government employment of 162,000. All the employees who accepted a deferred resignation fell off the payrolls then, so they were on the payrolls, but not working up to that point.

"The more dovish members of the Fed might feel a little vindicated as the unemployment rate has moved up to 4.6%, which is at the high-end of the participants' guesses of where it would end this year. A January cut may not be likely, but a March cut can't be ruled out.

"In October, private sector payrolls expanded by 52,000, but we all know that because of the benchmark revisions announced back in August that the real number is probably closer to -5,000. Despite that, retail sales held up pretty well in October. Consumers will do what they do best, which is consume, even in the face of job market uncertainty.

"October and November could be the inflection point for the labor market to emerge from the rough patch and to start getting some traction in 2026. The labor market lags GDP, so cap-ex spending and profit growth can help pull the labor market along."

PETER ANDERSEN, FOUNDER, ANDERSEN CAPITAL MANAGEMENT, BOSTON:

"Investors were looking for no surprises, something that would have some variability but nothing material.

"When the unemployment rate moves up at all like this, it does fuel the potential for continued rate cuts. But as we've seen in the past, this is not a consistent trend.

"We are now seeing some dissension in the Fed committee. There are people that were against lowering the most recent rate cut and also there's now considerable focus on who is going to lead the Fed. So right now the Fed is at most distracted as it possibly could be, and I don't think that there will be any major movement decisions until all that resolves."

KAY HAIGH, GLOBAL CO-HEAD FIXED INCOME AND LIQUIDITY SOLUTIONS, GOLDMAN SACHS ASSET MANAGEMENT, NEW YORK (via email):

"The Fed is unlikely to put much weight on today's report given data disruptions. Chair Powell commented last week that the report would likely be affected by shutdown-related distortions, making it a less reliable gauge of the labor market's health than usual. The report on December's employment data, released in early January ahead of the next meeting, will likely be a much more meaningful indicator for the Fed when it comes to deciding the near-term policy trajectory."

SEEMA SHAH, CHIEF GLOBAL STRATEGIST, PRINCIPAL GLOBAL INVESTORS, LONDON (via email):

" (Fed Chair) Powell is likely to view today's jobs data with a fair degree of skepticism. Not only are there likely to be some data distortions, but tighter immigration policies mean the headline November payroll figure should not be taken at face value - the labor market is not as weak as those numbers might initially suggest. That said, the larger-than-expected rise in the unemployment rate will still trigger some creeping concern within the Fed.

"The labor market is cooling - probably not sharply, but enough to warrant some additional monetary easing and, at the very least, a move towards neutral policy rates. The Fed may prefer to see further evidence of economic weakness before its next cut, but based on today's data, more rate reductions are likely next year than the single cut currently pencilled into the dot plot."

(Compiled by the Global Finance & Markets Breaking News team)