The November US labour market report showed a rebound from the dismal, weather-affected October report, as the overall employment situation remains resilient.

Headline nonfarm payrolls rose by 227k in November, a touch above consensus expectations, but well within the forecast range. At the same time, the prior 2 months of data was revised higher, by a net 56k, taking the 3-month average of job gains to +173k.

Meanwhile, unemployment rose by more than expected, to 4.2%, as labour force participation unexpectedly pulled back to 62.5%, the lowest level since May. Earnings, however, were a touch hotter than expected, rising by 0.4% MoM for the second straight month, and by 4.0% YoY. This, however, is a pace that shan’t threaten sustained achievement of the 2% inflation target over the medium-term.

Taking a step back, my base case remains that the FOMC will still deliver a 25bp cut later this month, continuing to normalise the monetary policy stance, as the labour market also continues to normalise. Naturally, the Committee will seek not to over-react to a single data point, particularly when incoming figures remain skewed by a number of one-off factors, though the modest rise in unemployment will embolden some of the Committee’s doves for now.

That said, if the current degree of labour market resilience persists into 2025, the employment situation could force the FOMC into a slower pace of policy normalisation, particularly as risks around the inflation outlook become increasingly two-sided, amid the incoming Trump Administration’s tariff plans, and likely delivery of further tax cuts.

Though the FOMC, clearly, are unable to react to policy rumours at this stage, next year will likely see significantly more uncertainty introduced to both the monetary and fiscal outlooks. A ‘skip’ at the January meeting remains a distinct possibility.

Consequently, with a renewed hawkish risk introduced to the rate path, the ‘policy put’ that has been in place over the last 18 months is set to become considerably less forceful. Hence, the market’s ‘comfort blanket’ – the prospect of deeper, or faster, rate cuts – likely won’t be present to the same extent next year.

Hence, while strong earnings and economic growth should continue to paint a positive backdrop for risk, and see the path of least resistance still leading to the upside, said path is likely to be somewhat bumpier, and considerably more volatile, than that seen over the last year or so.