Weekly Market Update: December 16, 2024

The nation added an estimated 227,000 jobs in November. That tally exceeded the consensus forecast of 214,000 and was a big recovery from the hurricanes and workers’ strikes that impacted October’s gain of just 36,000 positions. The prior two months’ jobs total also was revised higher by 56,000. 

Overall, the November employment and unemployment data painted a mixed picture. While the jobs gain was encouraging, it was accompanied by an uptick in the unemployment rate from 4.1% to 4.2% and a drop in the labor force participation rate to 62.5%. The decline in the latter metric indicates that a smaller percentage of the working-age population is either employed or actively looking for work, which can suggest that the labor market is weakening. On point, the nation has added an estimated 143,000 jobs per month over the last six months, which is below the pace (200,000) that is considered to be indicative of healthy growth. 

Meanwhile, inflation has proven a bit sticky this fall. The Consumer Price Index (CPI) increased 0.3% on a month-to-month basis in November and was up 2.7% over the last year. Both those figures were above the October readings. The core CPI, which excludes the more volatile food and energy components, rose 0.3% and 3.3% on a month-to-month and one-year basis, respectively, matching the prior month’s figures, but also not showing signs of additional progress in slowing the pace of price growth at the consumer level. 

As we went to press, the Federal Reserve was still expected to reduce the federal funds rate by a quarter point, to 4.25%- 4.50%, at the Federal Open Market Committee’s (FOMC) final monetary policy meeting of 2024, scheduled to conclude on December 18th. However, central bank leaders have been hinting that they could pull down rates at a slower pace than previously anticipated in 2025, given an expanding economy that continues to be powered by the strength of the consumer sector. According to the National Retail Federation, holiday spending is expected to reach a new record this season, with shoppers estimated to spend an average of $900 per person on gifts, food, and decorations. 

Conclusion: Many of the key elements, including a more-accommodative Federal Reserve, remain in place for another late-year “Santa Claus” rally. 

Source: ValueLine.com