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Summary

United States: The Song Remains the Same

• Incoming economic data continue to illuminate pockets of stress in the U.S. economy. The unwinding of strikes and hurricane effects lifted nonfarm payrolls by 227K in November; however, job gains remain highly concentrated by industry. Openings also continue to trend lower through the month volatility. Meanwhile, tariff-related stress is beginning to form in both the manufacturing and services sectors.
• Next week: NFIB Small Business Optimism Index (Tue.), CPI (Wed.), Federal Budget Balance (Wed.)

International: Potpourri of Global Economic Events and Data

• Even though Thanksgiving has passed, market participants had their plates full this week with international political developments, economic events and data releases. Political uncertainty took hold amid headline-making developments in South Korea and France, while we also gained further insight into economic conditions in a variety of advanced and emerging economies.
• Next week: Bank of Canada (Wed.), Brazilian Central Bank (Wed.), European Central Bank (Thu.)

Interest Rate Watch: Hawk or Dove, Data-Dependency Name of the Game

• The Fed's blackout period—or two-week stretch ahead of its meeting where Fed officials do not make public policy comments—begins this Saturday. Recent comments suggest members believe the path for policy has grown more uncertain, though there remains broad support for a gradual data-dependent reduction in rates.

Topic of the Week: Bad Day for Barnier

• On Wednesday, the French government collapsed after its National Assembly voted to oust Prime Minister Michel Barnier. President Macron now faces the difficult decision of appointing another prime minister to navigate the fragmented Assembly and pass a budget bill for 2025.

Full report here.

• Next week, the ECB is set to cut rates for the fourth time this year. Unlike the previous three cuts, the outcome of next week’s rate decision is not given as 1) the restrictive policy stance, 2) the deteriorating growth outlook, and 3) inflation at target has opened discussions of a 50bp cut. While a 50bp cut will certainly be discussed, we judge that the ECB will ultimately deliver a 25bp rate cut, and guide that they are open to any size of rate cuts at future meetings, subject to the incoming data. A 25bp cut next week will bring the ECB’s deposit rate to 3.0%. In the coming year, we expect a string of rate cuts, leading to a terminal rate of 1.5% being reached in September 2025.
• We expect a benign market reaction, even if Lagarde decides to twist guidance towards an increasing likelihood of a faster rate of normalisation.

Change guidance of policy restrictiveness

Since last year, the ECB has included a reference that it aims to keep monetary policy ‘sufficiently restrictive’ for as long as necessary. Following the disinflationary process that has gained traction through 2024, the updated staff projections next week are likely to forecast inflation on target from 2025 and onwards. Thus, whether monetary policy should stay restrictive is likely going to be debated. We believe that the slightly hawkish bias in the ECB’s communication is set to change as the need for a restrictive monetary policy stance in the Eurozone is no longer obvious. But the camps inside the GC are obviously divided. In a recent interview the ECB’s Schnabel said that in her view the restrictive part of the monetary policy stance is already fading. At the same time, we see the dovish camp, for example Villeroy, saying that there ‘won’t be any reasons’ for policy to remain restrictive.

A 25 or a 50bp rate cut? It is not the most important question

With activity indicators looking bleak heading into 2025, the case for a 50bp rate cut has strengthened, as the starting-point for financial conditions is restrictive based on most measures. However, given the ECB’s sole inflation mandate, and the ‘political’ aspect of having a gradual rate cutting cycle, we believe it will favour a 25bp rate cut.

However, whether the ECB will deliver a 25bp rate cut or 50bp rate cut in December is not that important in isolation, as the communication around it will be key as well. There seem to be diverging views on how to cut the cake. Most recently, Schnabel’s interview clearly suggested that she would opt for a 25bp rate cut, as would Vujcic, while others such as Lane, Villeroy and Centeno are more open to discussing a 50bp rate cut.

That said, rather than focusing on the rate cut next week, we should focus on where the policy rate will end in this cutting cycle, albeit we do not expect any verbal guidance on this. Markets may though interpret a 50bp cut as a signal of a lower terminal rate – and that may even be a signal that the ECB wants to send.

But as we do assume the ECB does not want a hawkish reaction from markets, leading to tighter financial conditions, we expect it to opt for a dovish 25bp cut, focusing on the communication on a potential jumbo cut.

Macro data since the October meeting has mainly given ammunition to the doves

Since the October meeting, the momentum in underlying inflation has fallen further and growth indicators have weakened. The composite PMI indicator declined sharply to 48.3 in November mainly driven by the service sector, which is now also in contractionary territory. Data indicates that the eurozone’s two largest economies, Germany and France, are likely to contract in Q4 while Spain should drive aggregate euro area growth together with Portugal and Greece. The deteriorating growth indicators combined with rising political uncertainty since the October meeting have mainly given ammunition to the dovish members of the ECB. However, the hawks’ last battalion, namely the labour market, continues to show resistance with the unemployment rate remaining at a record low of 6.3% in October and the national account data showing increased employment in Q3.

Underlying inflation has eased further

While headline inflation has increased from the three-year low in September, mainly reflecting base effects, the underlying momentum has continued to ease. The average month-on-month increase in seasonally adjusted core inflation has been 0.14% in the past three months, which is well in line with 2% annualised inflation. Importantly, the lower momentum in underlying inflation has been driven by service inflation where momentum is also quickly approaching the 2% target, according to the ECB’s own seasonally adjusted data. Hence, inflation developments have clearly also supported the doves in the ECB. For the hawks, an argument for a cautious cutting approach is wage growth that remains elevated given the tight labour market. Negotiated wage growth increased to 5.4% y/y in Q3, albeit largely driven by one-off payments, and has averaged 4.6% so far this year, compared to 4.4% in 2023.

Staff projections to show lower growth and inflation

We expect the ECB staff to take note of the recent easing in the momentum of underlying inflation and incorporate this into a lower forecast for core inflation next year relative to the forecast in September. We expect core inflation to be revised down to 2.2% y/y in 2025 (from 2.1%) and headline inflation to 2.1% y/y (from 2.2%). Oil futures were 6% lower at the cut-off date for the staff projections compared to December, but gas and electricity futures were higher, so we expect only a marginal reduction in the headline forecast. We expect the growth forecast to be revised down in 2025 to 1.1% y/y from 1.3% y/y due to the continued struggles in the manufacturing sector combined with cautious consumers and a weak German economy. In contrast to the ECB’s previous projections, consumers continue to have an elevated savings rate, which prevents consumption from picking up in the near term. The new staff projections will also include an additional year, albeit we do not attach significant weight to those projections given their embedded uncertainties.

Limited FX market reaction on 25bp rate cut

Speculation around a 50bp cut has diminished, with markets now largely positioned for a 25bp move, with only 27bp priced in. However, the post-decision communication will be crucial, given divisions within the Governing Council that could drive a range of market responses.

We view a dovish 25bp cut, where the ECB signals flexibility to adjust the size of future cuts, as the most likely scenario. Such an outcome would likely have a limited impact on EUR/USD, and with the probability of a jumbo cut still being priced in markets. However, should the ECB indicate a preference for continuing the easing cycle in 25bp increments, market pricing could shift, potentially triggering a hawkish response and a moderate EUR/USD rally, albeit given the meeting-by-meeting approach and thereby keeping full flexibility about future monetary policy decisions, we see that as a low probability outcome. By contrast, a 50bp cut – an outcome we believe is underappreciated despite weak euro area growth and inflation – would likely prompt significant EUR depreciation, with EUR/USD potentially dropping sharply.

Looking ahead, the Fed’s December meeting is likely to have a more decisive impact on EUR/USD’s near-term trajectory, with Friday’s US jobs report a critical input. While markets currently assign a decent probability to a Fed pause, we expect a 25bp cut. If this materialises, it should help contain further EUR/USD downside into year-end. Seasonal trends and our short-term valuation models support this view, as EUR/USD appears oversold after its sharp decline since October. We expect the pair to close the year at around 1.06.

From a strategic perspective, we maintain our bearish EUR/USD outlook, driven by the relatively stronger US growth narrative. Our 12M target remains 1.01, making parity a plausible level over the coming year. On the rates side, we note that the significant decline in rates over the past month has brought the spot level for long swap rates close to our 12- month forecast, thus offering a very limited declining profile from here, see more in Yield Outlook - Transatlantic decoupling but not for much longer, 28 November 2024. We do not expect a signal from the ECB to address the French spread widening to peers.

This week, we published our macroeconomic projections for the global economy and the Nordics. In the euro area, we expect growth to slowly increase during 2025, but the near-term outlook is weak. We expect some cooling in the US, but steady economic growth to continue despite fiscal and trade policy uncertainties. China continues to struggle with the heavy housing crisis, but stronger steps are taken to turn this around. New tariff clouds hang on the horizon, though and we have revised down our growth outlook.

In fixed income markets, France once again attracted attention after the parliament ousted PM Barnier. The political turmoil drove the OAT-Bund spread to new highs but later the move reversed. President Macron refused to step aside, and his first task will be to name a new PM. In a week where global yields largely traded sideways there was little French market contagion or South Korean for that matter, following the six hours of martial law, that did however plummet the Won.

In Europe, retail sales were a bit stronger than expected in October, which supports the outlook for more consumer driven growth going forward. The breakdown of the Q3 national accounts also revealed surprisingly strong domestic demand with solid investments and household consumption. Annual growth in compensation per employee was 4.4%, close to ECB projections, which supports the view of underlying inflation converging towards the 2% target.

In the US, weaker than expected ISM data blurred the picture of the service economy, which has largely looked strong recently. The jobs report was no big market mover but on the margin to the weak side. Close to 300,000 new jobs (including revisions) is strong but at odds with a much weaker employment picture in the household survey. Besides, it came along with a higher unemployment rate and a shrinking labour force, not exactly a sign of strength. It adds tailwinds to our call for back-to-back rate cuts at the upcoming FOMC meetings. This mix of solid euro area data and US data on the weak side contributed to some retraction in the recent month's move lower in EUR/USD.

Next week, the ECB is set to cut rates for the fourth time this year. Weak data (besides this week) and inflation at target have opened for discussions on whether a 50bp cut is appropriate. We think it will certainly be discussed, but ECB will ultimately go for 25bp, and guide that they are open to bigger cuts later, subject to incoming data. We expect a similar cut from the SNB bringing the Swiss policy rate to just 0.75%.

In the US, the November CPI release will draw most attention. We expect core inflation has slowed down slightly, which would support our call for another rate cut from the Fed in December. In China, we will keep an eye on the Central Economic Work Conference, where the top leadership discusses and lays out economic priorities for the next year. Elsewhere in Asia, we will look out for the Tankan business survey; key input for the next Bank of Japan meeting, where we expect another rate hike.

Full report in PDF.

• Last policy decisions of 2024 to shape market mood
• RBA, BoC, SNB and ECB are on the agenda
• US CPI report to be crucial too as Fed undecided

RBA to hold rates, but will it turn less hawkish?

The Reserve Bank of Australia will kick off the central bank bonanza next week, announcing its decision on Tuesday. Unlike its major peers, the RBA has not yet embarked on a rate-cutting cycle as policymakers remain wary about inflation despite the recent decline.

Governor Michelle Bullock said underlying inflation is still “too high” in recent remarks and doesn’t expect for it to return to target sustainably until 2026. Unless that outlook changes, the RBA isn’t about to ditch its ‘higher for longer’ stance anytime soon, and investors don’t see a rate cut before April 2025.

Even April was considered a bit optimistic prior to the GDP data that showed Australia’s economy grew by slightly less than forecast in the third quarter. The soft reading undermines Bullock’s claim about the level of excess demand in the economy. Monthly CPI was also weaker than expected in October, and further downside surprises could see the timing of the first rate reduction being brought forward again.

This may prompt Bullock and other board members to sound a little more upbeat about inflation as they keep rates at 4.35%. A dovish lean could push the Australian dollar below the four-month lows brushed on the back of the GDP print.

Aussie traders will also be keeping an eye on the November employment report due on Thursday, as well as CPI and PPI figures out of China on Monday, and November trade figures on Tuesday.

Whilst the Chinese data will be important in gauging the health of the world’s second largest economy, a bigger market mover might be any new announcement on stimulus, as political leaders meet next week to set out Beijing’s economic plan for 2025.

Will the BoC cut by 50 bps again?

In sharp contrast to the RBA, the Bank of Canada has been taking the lead in the global race to cut rates. The BoC has slashed rates four times this year, the last being a hefty 50 basis points. But investors are split if another double cut is likely in December.

Both headline and underlying measures of inflation ticked up in October, and the jobs market is rebounding after a soft patch. On the other hand, growth remains subdued and businesses are downbeat about the outlook, especially now that US president-elect Donald Trump is threatening tariffs of 25% on all Canadian imports.

Another consideration for the BoC is the widening yield spread with the US, as the Fed has not been as aggressive and may even go on pause soon. With the Canadian dollar already down more than 6% this year, policymakers may not want to risk lowering rates significantly below US ones.

Hence, Wednesday’s decision of whether to cut by 25 bps or 50 bps will likely be a very close call, and the risks to the loonie are symmetrical.

Dollar awaits CPI data as Fed meeting looms   

The December policy decision is also proving to be a bit of a dilemma for the Federal Reserve. Judging by the latest rhetoric, most Fed officials appear to be in favour of a 25-bps reduction at the December 17-18 meeting but are not ready to commit just yet.

The CPI report for November out on Wednesday will be the last major piece of the jigsaw for policymakers ahead of the meeting, so a strong market reaction is almost guaranteed.

The headline rate of CPI is expected to edge up from 2.6% to 2.7% y/y, while core CPI is projected to stay unchanged at 3.3% y/y. Barring any upside surprises, the Fed will probably be inclined to lower rates and keep the January meeting as an option for pausing.

The producer price index will follow on Thursday.

The US dollar is consolidating after hitting two-year highs in November. Any unwelcome acceleration in the month-on-month rates could recharge the bulls to drive the dollar index to fresh highs.

SNB set for first cut under dovish new Chairman

The Swiss National Bank has trimmed rates three times since March when it became the first of the major central banks to ease policy. It’s widely expected to cut again in December, which will be new Chairman Martin Schlegel’s first decision since taking over from Thomas Jordan in October.

However, the size of the cut is less certain, and the choice between 25 bps or 50 bps was looking like a coin toss until the October CPI data came along. Switzerland’s annual CPI rate increased by 0.7%, falling short of the 0.8% expected. The odds for a 50-bps cut subsequently rose to more than 60%.

Dovish remarks by Schlegel have further boosted the chances for a larger reduction, after he repeatedly floated the idea of reintroducing negative interest rates if necessary.

Should the SNB opt for a 50-bps cut on Thursday, the Swiss franc could resume its downfall against the US dollar. However, if policymakers stick with a 25-bps increment, the franc could extend its latest recovery.

ECB unlikely to go big in December

Soon after the SNB announces its policy settings, the European Central Bank is expected to hit the headlines with its rate decision. A rate cut is almost certain, with economists predicting a 25-bps reduction. However, some investors think that a 50-bps cut is on the cards, although the odds have fallen in recent days to about 15%.

This has helped the euro to stabilize a little against the US dollar as ECB policymakers, including President Lagarde, have been careful not to pre-commit to a particular rate path amid a pickup in inflation in the euro area.

Nevertheless, a weak economy and renewed political uncertainty in both France and Germany have some traders betting that the ECB will have to be a lot more aggressive with its policy easing in the coming months.

However, it’s unlikely that the ECB will change its stance just yet and if it cuts rates by 25 bps as forecast on Thursday, the euro may not move much unless there is some unexpectedly dovish language by Lagarde in her post-meeting press briefing on Thursday that spurs a fresh selloff.

Pound rebounds ahead of UK data

Across the channel, the uncertainty over the UK economic outlook has also risen, mainly on the back of the Labour government’s budget. The tax and spend budget has been widely perceived as boosting inflation, limiting the scope for the Bank of England to cut interest rates. And whilst it does include measures that could lift growth, in the immediate term, the British economy appears to have stagnated.

GDP numbers for October will therefore be closely watched on Friday for signs that growth is coming out of the doldrums.

Although sterling has recouped a decent portion of its recent losses against the greenback, stronger-than-expected growth data could help it extend the gains.

Elsewhere, the yen might be sensitive to any revisions to Japan’s Q3 GDP print on Monday and any surprises in Friday’s quarterly Tankan business survey amid ongoing speculation about whether or not the Bank of Japan will hike rates at its December meeting.

Hello fellow traders. In this technical article we’re going to take a look at the Elliott Wave charts charts of Bitcoin BTCUSD published in members area of the website. Our members know BTCUSD is showing impulsive bullish sequences in the cycle from the 50186 low. Recently, it made a clear three-wave correction. The pull back completed as Elliott Wave Double Three pattern and made rally toward new highs as expected. In this discussion, we’ll break down the Elliott Wave pattern and forecast.

Elliott Wave Double Three Pattern

Double three is the common pattern in the market , also known as 7 swing structure. It’s a reliable pattern which is giving us good trading entries with clearly defined invalidation levels.
The picture below presents what Elliott Wave Double Three pattern looks like. It has (W),(X),(Y) labeling and 3,3,3 inner structure, which means all of these 3 legs are corrective sequences. Each (W) and (Y) are made of 3 swings , they’re having A,B,C structure in lower degree, or alternatively they can have W,X,Y labeling.

BTCUSD Elliott Wave 1 Hour Chart 12.03.2024

BTCUSD is giving us pull back against the 90818 low. The structure of this pullback is still incomplete at the moment, showing 5 swings down from the peak. The first leg, shows a clear 3-wave structure a,b,c red, followed by a 3-wave bounce in (x) blue. Wave (y) blue should also form a 3 waves pattern. We miss another swing down to complete clear 7 swings pattern in ((ii)) pull back. We advise against selling $BTCUSD and instead favor the long side. While the price stays above 4 red low: 90818, we expect to see further rally toward new highs.

BTCUSD Elliott Wave 1 Hour Chart 12.03.2024

Bitcoin found buyers as expected. The crypto completed Double Three pattern and reacted strongly. Eventually we got a break toward new highs. Now, intraday pull backs should ideally keep finding buyers as far as 90759 pivot holds.

Markets

In the absence of important eco data and no new market moving political developments (in France or elsewhere), European market enjoyed a brief pauze after recent swings. European traders simply joined the countdown to the US payrolls which, alongside the November CPI data scheduled for next week, were supposed to provide last key input for the Fed December 18 policy meeting. After last months’ near-stagnation, mainly driven by hurricanes and strikes, US job growth rebounded by a close-to-expectations 227k. However, data from the previous two months also were upwardly revised by a net 56k. Goods producing sectors added 34k. Private services jobs grew 160k. Wage growth also was slightly stronger than expected with average hourly earnings at 0.4% M/M and 4.0% Y/Y. However evidence from the separate consumer survey was far less inspiring. With a 193k decline in the workforce, a 355k decline in employment, a rise in the unemployment rate from 4.1% to 4.2% and a decline in the participation rate from 62.6% to 62.5%.

Markets apparently focused more on the content of the consumer survey and see the rise in the unemployment rate as supporting the case for an additional 25 bps rate cut at the December meeting. US yields in a ‘logical’ steepening move decline between 6.5 bps (2-y) and 2.5 bps (30-y). Money markets raised the expectations for a 25 bps December Fed cut to almost 90%, from about 70% yesterday evening. German/EMU yields fell prey to modest spill-over effects from what happened in US and switched small gains for small losses. German yields currently decline between 3.0 bps (2-y) and 2.5 bps (10-y). EUR/USD briefly jumped well north of to the 1.06 (top near 1.0630) but were almost immediately undone with the pair currently again trading near unchanged levels (1.0585 area). The yen again outperforms with USD/JPY breaking further below the 150 mark (149.5). Equities apparently feel OK with the ‘confirmation’ that there is room for gradual further Fed easing. The S&P (+0.35%) is touching a new all-time record. The EuroStoxx 50 also enjoys the (relative political) calm, adding 0.45%.

News & Views

Hungary’s Orban has threatened vetoing the European Union’s next long-term budget if the European Commission does not distribute the some €20bn EU funds it is withholding over concerns related to the rule of law. The Hungarian president said that “the funds we don’t receive in 2025 and 2026 we’ll have to receive in 2027 and 2028” or he will torpedo the seven-year budget that outlines EU spending from 2028. Not having access to these resources was among the reasons for rating agency Moody’s to cut the outlook for Hungary’s credit rating last week. Hungary is marching towards parliamentary elections in 2026 and Orban’s party is trailing the pro-EU opposition party Tisza. Copy pasting the 2022 script with huge spending is given overstretched public finances a no-go. Sticking to the budget, Hungary’s AKK released its 2025 financing plan today. Gross bond issuance amounts to HUF 12.838bn. HUF 4123bn is needed to plug the cash deficit with the remaining part consisting of maturities (HUF 8043 bn) and switches and buybacks. Funding relies more heavily on the HUF institutional market next year, with HUF 3992 bn planned in HGB auction issuance. The AKK plans to issue HUF 200 bn in green bonds. It keeps the 30% upper bound on the share of FX debt for 2025. An international FX bond with a volume of up to €2.5bn is planned for the first half. This will include a €1bn green Eurobond and Chinese yuan-denominated panda bonds. The forint today again underperformed other regional currencies, probably on the ongoing rift between PM Orban and the EU.

Canadian employment grew 50.5k in November, double the 25k expected and picking up from the 14.5k in October. Employment gains were concentrated in full-time work (+54k). The bulk comes on the account of the public sector (45k), offsetting the meaning of the headline beat. The unemployment rate rose to the highest level since September 2021 (6.6%) though came together with an uptick in the participation rate to 65.1%. The employment rate steadied after falling for six months at 60.6%. The hourly wage rate missed the bar sharply, 3.9% vs 4.7% expected and down from 4.9%. The Canadian dollar loses ground against the US dollar, which just suffered a minor setback from the US Payrolls as well. USD/CAD trades around 1.409. The market-implied probability for a back-to-back 50 bps rate cut at the December 11 Bank of Canada meeting rose to 80% after the report.

Daily Pivots: (S1) 1.0533; (P) 1.0562; (R1) 1.0615; More...

EUR/USD breached 1.0609 resistance briefly but quickly retreated. Intraday bias remains neutral first. On the upside, firm break of 1.0609 resistance will resume the rebound from 1.0330 to 55 D EMA (now at 1.0729). But strong resistance could be seen there to limit upside. On the downside, break of 1.0330 will resume the fall from 1.1213. Also, sustained trading below 1.0404 key fibonacci level will carry larger bearish implication.

In the bigger picture, immediate focus is now on 50% retracement of 0.9534 (2022 low) to 1.1274 at 1.0404. Strong rebound from this level will keep price actions from 1.1273 (2023 high) as a medium term consolidation pattern only. However, sustained break of 1.0404 will raise the chance that whole up trend from 0.9534 has reversed. That would pave the way to 61.8% retracement at 1.0199 first. Firm break there will target 0.9534 low again.

Daily Pivots: (S1) 1.2712; (P) 1.2742; (R1) 1.2790; More...

GBP/USD's rebound from 1.2486 continues today and intraday bias stays on the upside for 55 D EMA (now at 1.2849). Strong resistance is expected there to limit upside, and bring resumption of whole fall from 1.3433. On the downside, below 1.2615 minor support will bring retest of 1.2486 low first. However, sustained break of 55 D EMA will argue that the near term trend has reversed, and targets 1.3047 resistance for confirmation.

In the bigger picture, a medium term top should be in place at 1.3433, and price actions from there are correcting whole up trend from 1.0351 (2022 low). Deeper decline is now expected as long as 55 D EMA (now at 1.2849) holds, to 38.2% retracement of 1.0351 to 1.3433 at 1.2256, which is close to 1.2298 structural support. Strong support should be seen there to bring rebound.

Daily Pivots: (S1) 149.59; (P) 150.18; (R1) 150.71; More...

USD/JPY dips mildly but stays in range above 148.64 and intraday bias remains neutral. On the downside, break of 148.64 will strengthen the case that rise from 139.57 has already completed at 156.754. Deeper fall should then be seen to 61.8% retracement of 139.57 to 156.74 at 146.12 next. Nevertheless, firm break of 151.94 resistance will revive near term bullishness and bring retest of 156.74 high.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

The U.S. economy added 227k jobs in November, in line with the consensus forecast calling for a gain of 218k. Payroll figures for the two prior months were revised higher by 56k.

Private payrolls rose 194k, with the largest gains seen in health care & social assistance (+72.3k), leisure & hospitality (+53k), professional & business services (+26k) and manufacturing (+22k). The gain in manufacturing were largely payback from the month prior following the resolution of the Boeing strike. The public sector added 33k new positions last month.

In the household survey, civilian employment (-355k) fell by considerably more than the labor force (-193k), which pushed the unemployment rate up to 4.2%. The labor force participation rate fell 0.1 percentage points to 62.5% - a six-month low.

Average hourly earnings (AHE) rose 0.4% month-on-month (m/m), matching October's gain. On a twelve-month basis, AHE were up 4.0% (unchanged from October). Aggregate hours worked rose sharply, up 0.4% m/m.

Key Implications

This morning's release provided further evidence that October's soft employment report was more to do with temporary effects stemming from hurricanes and labor disputes, and not a sudden deterioration in the labor market. Not only did job creation regain its vigor in November, but revisions to prior months were also a tad higher, and aggregate hours worked grew at the fastest pace in eight months.

Smoothing through the recent volatility, job gains have averaged 173k over the past three-months, or only a modest stepdown from the 186K averaged over the prior twelve-month period. But this likely overstates the degree of "strength" in the job market. A broader sweep of the data suggests that the labor market has already come back into better balance, and is no longer a meaningful source of inflationary pressure. Moreover, the fact that the labor force has contracted in each of the past two-months suggests that job seekers are starting to internalize the fact that jobs are becoming harder to come by – a further indication that the labor market is cooling. This should give policymakers the assurance they need to cut by another quarter-point later this month. But with inflation progress showing early signs of stalling and some of the incoming administration's policy proposals (including the potential for tax cuts and tariffs) viewed as inflationary, the Fed is likely to proceed more cautiously with easing its policy rate in 2025