U.S. stock futures sank Friday morning after the Labor Department’s monthly jobs report for November showed payrolls grew by 263,000, higher than estimated, while unemployment held at 3.7%. Bloomberg expected a print of 200,000 for the month.
Futures tied to the S&P 500 (^GSPC) tumbled 1.4%, while futures on the Dow Jones Industrial Average (^DJI) fell by 1.1%, or about 370 points. Contracts on the technology-heavy Nasdaq Composite (^IXIC) slid 2.2%.
Friday’s moves in the early trade come after an upbeat week for equity markets, with sentiment lifted by Federal Reserve Chair Jerome Powell’s indication of a moderation in the pace of interest rate increases, and China relaxing some COVID lockdowns following unrest over restrictive virus controls.
For the month, stocks had a lackluster start, with a mixed close across the major averages on Thursday, the first day of December. However, according to Carson Group’s Ryan Detrick, no month is more likely to see the S&P 500 end with a gain than December: the benchmark index has been up for the month 75% of the time since 1950.
U.S. investors are squarely focused on the jobs report, the last monthly employment snapshot before the Federal Reserve convenes for its next rate-setting meeting Dec. 13-14.
Secretary of Treasury Janet Yellen at a conference earlier this week in New York said the jobs report is the most important data point – in addition to inflation data – that policymakers watch in determining monetary decisions as they take action to restore price stability.
“The US labor market is starting to show tentative signs of softening, but only at the margins, so tomorrow’s Jobs Report will be an important datapoint to watch,” DataTrek’s Nicholas Colas said in an emailed newsletter Friday. “The issue of long-term unemployment was a vexing one after the Great Recession, and we will keep an eye on it as joblessness starts to increase.”
A further moderation in November labor market data would be a welcome sign for central bankers who have been working to tamp down labor market tightness, driven by excessive job openings, that has placed upward pressure on wages and contributed to soaring prices. But
many are worried that the labor market momentum that has encouraged officials to press on with aggressive rate hikes will cause them to overshoot and tip the U.S. economy into a recession.
While jobs numbers have so far reflected resilience in the U.S. employment picture, economists expect job growth to trend downward as lagging the impact of higher interest rates catches up. Bank of America expects the unemployment rate to hit 5.5% in 2023, Morgan Stanley 4.3%, and Goldman Sachs, half a percentage point higher to 4.2%.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc