Jobs Report Blows Past Expectations: What the Experts Are Saying

The November jobs report exceeded economists' expectations by a wide margin, fueling investor anxiety that the Federal Reserve won't be pivoting away from its hawkish monetary policy anytime soon.

Wages likewise came in above forecast, adding to fears that the central bank has much more work to do in its bid to whip the worst inflation in four decades.

Nonfarm payrolls increased 263,000 last month, while the unemployment rate remained unchanged at 3.7%, the Labor Department reported Friday. Economists were looking for the economy to add 200,000 new jobs in November. And while the unemployment rate matched consensus expectations, average hourly earnings increased 0.6% for the month. That figure doubled economists' average forecast. On an annual basis, wages rose 5.1% vs. projections for a 4.6% increase in average hourly earnings.

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Stocks responded by selling off sharply on the news, reversing gains made after Fed Chair Jerome Powell signaled that the central bank would slow its pace of rate hikes in a speech given Wednesday. 

The blue-chip Dow Jones Industrial Average, broader S&P 500 and tech-heavy Nasdaq Composite all gapped down at Friday's open.

To get a sense of what the experts are making of the November jobs report, below please find a selection of commentary from economists, strategists, portfolio managers and other market pros, sometimes edited for clarity or brevity.

• "This jobs report surprised on the upside, but the most important component was wage growth. Private service industry jobs were up 0.8 percentage point, while goods jobs were up 0.6 percentage point, and overall wage growth accelerated in October (based on the revision) and then dropped marginally from there in November. This matters because services are driving inflation higher, and the biggest contributor to that is higher wages. Wage growth has been abating for the past few months, but are back up in October and November. This is unlikely to be a big enough shift to change the Fed's approach this month – I still expect a 50 basis point hike [0.5%]. But it will be a slightly disappointing jobs report for Fed officials." – Megan Greene, global chief economist at Kroll Institute
• "The labor market continues to show strength fueled by overall demographic trends and ongoing consumer demand, which may be cooling off despite a solid holiday buying season. The Federal Reserve has signaled that the pace of rate increases may slow this month, but that rates will remain higher for a longer period of time. Today's report shows that the recent aggressive rate increase policy has not significantly hampered the labor market." – Eric Merlis, managing director and co-head of global markets at Citizens Bank

• "Once again, employment creation beat expectations and showed a still strong U.S. labor market. The U.S. economy has added an average of 392,000 jobs per month during the year, which is a very strong performance compared to history. This is, of course, not good news for the Federal Reserve (Fed) going into this month's Federal Open Committee (FOMC) meeting. The Fed is trying to weaken the U.S. labor market in order to slow potential inflation pressures coming from higher wages." – Eugenio Aleman, chief economist at Raymond James 
• "Hourly earnings is the biggest stand out in the employment report. This is consistent with the personal income number – wages are still rising. Both establishment and household surveys showed solid job growth. Revisions were positive. These are moving in the right direction BUT are still not showing a deteriorating labor market. This report does not paint the picture of a moderating labor market. Either it's taking longer (lagging) or simply higher interest rates aren't impacting the labor economy as much as the market 'hoped.'" – John Luke Tyner, fixed income analyst at Aptus Capital Advisors 
• "Another case of good news is bad news. These hot numbers have clawed back a meaningful amount of the optimism that the market had seen in Jerome Powell's comments earlier in the week. No one seems to think the Fed will now go to 75 basis points [0.75%] in December instead of 50 basis points, more of an expectation of increases next year being higher, and the forecasted peak rate for 2023 has risen closer to where it was before Powell spoke. The focus of the Fed on the labor market is problematic as there remain so many job openings that even as layoffs are announced by some companies the people involved are not likely to stay unemployed for long. The tight labor situation is also reflected in the strong hourly earnings number." – Louis Navellier, chairman and founder of Navellier & Associates
• "Today's much-anticipated jobs report was another indicator of a labor market that is still filled with job openings, which remain well in excess of available labor (in fact, the ratio of job openings to unemployed is at 1.7). The fact is that segments of the services economy, in particular, such as education, are simply not that sensitive to interest rates, while regions of the economy that are, such as housing, are responding as we would expect. Today's report only displayed a very modest reduction in hiring trends from the extremely strong levels of the past couple of years. Much of the recent economic data shows an economy that is slowing, but clearly this deceleration is being led by the 'goods' economy. In addition, we (but more importantly the Fed) have our eyes very focused on the wage data. Today's average-hourly earnings data came in stronger than expected, at 0.55% month-over-month and 5.1% year-over-year, which is still sticky-high and could be for a while. Hence, we think much of the economic data being released of late, when coupled with the recently better inflation data is providing an ample backdrop for the Fed to moderate rate hiking and eventually get to a pause." – Rick Rieder, BlackRock's chief investment officer of global fixed income

• "Nonfarm payrolls rose 263,000 in November, 63,000 above consensus. The bigger surprise was the 0.55% rise in average hourly earnings, the fastest pace since January. Our wage tracker stands at +5.5% in Q4, compared to +5.4% in Q3. While the response rate to the establishment survey was much lower than normal, we don't see a compelling reason why this would create an upward bias in either payrolls or average hourly earnings. The household survey was not as strong, with an unchanged unemployment rate and a surprising drop in labor force participation. We continue to expect a 50 basis point funds rate hike in December and 25 basis points hikes each in February, March, and May." – Jan Hatzius, chief economist, Global Investment Research Division at Goldman Sachs
• "When good is bad: strong November jobs report keeps pressure on Fed to tighten. Policymakers at the Federal Reserve have made clear that they want to see a healthier balance between supply and demand in the labor market. Ideally, robust labor supply growth would alleviate the need for much pain on the demand side. However, the labor supply picture this year has been underwhelming, and today's report was yet another disappointment on that front. The labor force participation rate declined a tenth of a percentage point and is now below where it was in January. Furthermore, Chair Powell acknowledged in a recent speech that 'policies to support labor supply are not the domain of the Fed: Our tools work principally on demand.' The message from Chair Powell and company is clear: labor cost growth needs to slow to a rate consistent with the Fed's 2% inflation target, and the Fed will do what it takes to achieve this goal on the demand side regardless of what is happening on the supply side." – Sarah House, senior economist at Wells Fargo 
• "Friday's stronger-than-expected jobs report gives the Federal Reserve more reasons to continue raising interest rates and maintain tighter monetary policy for longer, at least until the labor market begins to weaken, which is a signal that the market does not want to hear right now. While Friday's jobs report is a lagging indicator, the data still matters to confirm the future course of monetary policy. The Fed needs tangible, empirical evidence to justify their policy decisions, and concrete jobs data is one metric they can point to as justification. We expect the employment picture to weaken in accordance with the Fed's higher for longer messaging when it comes to interest rates. Tighter financial conditions are already impacting sectors of the economy like housing and manufacturing, and we expect the employment numbers to weaken in 2023. Seasonally, we're at the point of the year where we would expect a year-end rally, so the recent stock market rally is historically in line with past market performance. Ultimately, we still believe there are risks to the downside and expect the market to trend lower. While a less hawkish Federal Reserve may provide a short-term boost to the market heading into year-end, more data is needed to confirm the trajectory of inflation and the trajectory of earnings – both of which are wildcards for 2023." – Robert Schein, chief investment officer at Blanke Schein Wealth Management
• "The consensus for payrolls is 200,000; the Bureau of Labor Statistics says the margin of error is about 115,000, so anything between 85,000 and 315,000 is not statistically significantly different from the consensus. But markets would react anyway." – Ian Shepherdson, chief economist at Pantheon Macroeconomics