Latest Jobs Report Comes in Stronger Than Expected

It was a packed week for economic data, as ongoing discourse surrounding potential rate cuts dominated market headlines. The week commenced with key releases such as the JOLTS Job Openings and ISM Services Index on Tuesday. Despite the ISM figure surpassing market expectations at 52.7, indicating economic expansion (with any score above 50), the market's reaction leaned more toward the underwhelming JOLTS report, tracking job openings. Though not a primary labor market indicator, any hint of a cooling labor market implies economic slowdown and potential deflation.

Yields saw a decline continuing into Wednesday as the ADP Employment change fell softer than anticipated. However, a slight yield reversal occurred on Thursday as Initial Jobless Claims aligned with analysts’ projections.

After a week of somewhat expected news, market attention is now fixed on the eagerly awaited Nonfarm Payroll numbers. This report is widely hailed as the most reliable gauge of the US labor market's health. In recent weeks, markets anticipated that this week's labor market reports will demonstrate to the data-dependent Fed that policy is effectively moderating economic pace. But, those predictions did not align with the latest numbers. Net job gains came in at 199,000, which was 19,000 higher than Economists estimate of 180,000. The unemployment rate was expected to stay steady at 3.9 percent, but November saw it drop to 3.7 percent.

These numbers could lead to the Fed maintaining rates at cycle highs, and may dampen rate cut expectations.