Jobs report sends clear message to Fed that it needs to act

America's job market rebounded in November, clearing the path for the Federal Reserve to cut interest rates again at its next meeting this month. 

Employers added 227,000 jobs last month, in a solid recovery from October, when the effects of strikes and hurricanes saw job creation slow substantially to just 36,000. 

Stock futures edged higher after the release, which also showed the unemployment rate had risen slightly up to 4.2 percent.   

Friday's report from the Labor Department provides some relief from investors, confirming that October's weak jobs report was down to external factors, rather than a more fundamental weakness in the economy. 

Markets are now pricing in an 88 percent chance that the Fed will cut interest rates by a quarter percentage point at its next meeting on December 18, according to the FedWatch tool.

'Data this morning was a Thanksgiving buffet with payrolls spot on, revisions positive, but unemployment ticking higher despite the participation rate falling,' said Lindsay Rosner, head of multi-sector investing at Goldman Sachs Asset Management.

'This print doesn't kill the holiday spirit and the Fed remains on track to deliver a cut in December.'

Lower interest rates will make borrowing money less expensive, taking some of the pressure off consumers' wallets. 

'The market still favors a rate cut from the Fed later this month and this report may not change that expectation,' said Bret Kenwell, eToro US Investment Analyst.

'Had it shown blistering strength, then a discussion for keeping rates unchanged at the current meeting may have gained steam. 

'As it is though, this report was better than expected but close enough to "in-line" to keep the status quo intact - which calls for a 25 bps rate cut in mid-December.' 

While the Fed rate does not directly affect rates for loans, credit cards and mortgages, it strongly influences them. 

Lower rates are also seen as generally good for businesses - so as they fall, the stock market rises. This is also good news for Americans with 401(K) retirement accounts, which tend to be invested in major stock indices.  

Tom Porcelli, chief US economist at PGIM fixed income, told Bloomberg TV on Friday: 'This is a kind of number that will support the Fed cutting rates in December.'

He added that two or three more cuts in the coming year is 'completely reasonable.'  

The Fed has lowered interest rates by 75 basis points since September, when it launched its easing cycle with a bumper cut. 

Benchmark borrowing costs are now between 4.5 percent and 4.75 percent, having been hiked to decade-highs between March 2022 and July 2023.

Further cuts will have an impact on many aspects of Americans' finances - but consumers will have to wait longer to feel relief in some areas than in others.

Rates for credit card and personal loans should continue to decrease, providing some respite for borrowers.

But how much credit card lenders will cut rates by is unknown, and APRs are set by banks, so any decrease will not be instant and will depend on the bank and the type of card.

With the economy continuing to expand at a healthy pace, inflation stuck above the central bank's 2 percent target and policy uncertainty from President-elect Donald Trump's incoming administration, the outlook for further rate cuts in 2025 is unclear.

Business sentiment perked up in the aftermath of Trump's victory on hopes of fewer regulations. 

But his promises to raise tariffs on imports and carry out mass deportations have raised concerns of higher prices for Americans and disruptions to the labor market.

Traders are currently betting on another two rate cuts next year, and a possibility of a third before the end of 2025.