The November jobs report should be a welcome sign for investors betting the US economy isn't on the verge of tipping into recession.
Data out Friday from the Bureau of Labor Statistics showed the US economy added 199,000 jobs in November while the unemployment rate ticked lower to 3.7%. Job growth was higher — and the unemployment rate lower — than economists had forecast.
"This [is] what a soft landing looks like," RSM chief economist Joe Brusuelas told Yahoo Finance Live Friday morning. "This is what full employment looks like."
This report offers crucial support to the recent market narrative that the Federal Reserve's interest rate hiking campaign could end in a so-called soft landing, in which inflation retreats to the Fed's 2% target without the economy falling into recession.
Nationwide chief economist Kathy Bostjancic noted Friday's report provides a "reality check" to market's recent expectations for an interest rate cut.
Prior to the report, BlackRock Investment Institute global chief investment strategist Wei Li noted that markets had "overdone" their expectations for rate cuts early in 2024. "Something will have to go seriously wrong for that to come through," Li said.
During the Federal Reserve's rate hiking cycle, good economic news like Friday's release hasn't always been greeted with investor cheer, with strong data indicating to some that the Fed's policy was not restrictive enough.
But since the Fed's November meeting, the market has been in broad agreement the central bank won't be raising rates next week and is likely done for this cycle.
Rather, the biggest change on Friday came around expectations for future rate cuts. Markets are now pricing in about a 47% chance the Fed cuts rates by 25 basis points at its March meeting, down from a 55% chance just a day prior, according to data from the CME Group.
Friday's jobs report is also the latest data showing the labor market isn't cracking, but normalizing, something the Federal Reserve has been clamoring for since it began its rate hiking cycle.
Tuesday's Job Openings and Labor Turnover Survey, or JOLTS report, revealed the ratio of job openings to the number of unemployed workers fell to 1.34, its lowest reading since August 2021.
Private payroll data out earlier this week showed the continuing erosion of outsized wage gains seen during the pandemic, easing concerns that a surge in wages could fill consumer wallets and create additional inflation pressures.
In sum, the data paints a picture of a labor market coming into "better balance" rather than one suggesting the economy is on the verge of tipping into recession.
"Labor market conditions remain very strong, and the economy is returning to a better balance between the demand for and supply of workers," Fed Chair Jerome Powell said in a speech on Dec. 1. "The pace at which the economy is creating new jobs remains strong, and has been slowing toward a more sustainable level."
Powell is set to provide further updates next Wednesday, Dec. 13, after the Fed's latest policy decision.
Still, economists expect the next move for interest rates to be down rather than up despite the economy's resilience through the end of 2023.
"We maintain our call for the Fed to start cutting rates by mid-year, but it is contingent on inflation continuing to trend lower and further weakening in economic activity," Bostjancic said Friday.
Josh Schafer is a reporter for Yahoo Finance.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance