Investing.com -- November saw a strong recovery in payrolls, with a 227,000 gain surpassing consensus expectations of 220,000, and net upward revisions of 56,000 for prior months.
In a note to clients reacting to the data, Morgan Stanley (NYSE: MS ) noted it pushed the three-month payroll average to 173,000, exceeding the trends from the second and third quarters.
The bank said the report indicates robust employment growth consistent with expectations for solid GDP in the fourth quarter. "A solid rebound in payrolls and upward revision are consistent with strong output & consumption growth in 4Q," they write.
Aggregate hours worked rose at an annualized 0.5% rate, matching the pace of Q3, while aggregate payroll incomes accelerated at a 5.5% annualized rate, supporting strong consumer spending, says the bank.
Morgan Stanley notes that professional and business services payrolls rebounded less than anticipated, but manufacturing payrolls reflected the return of Boeing (NYSE: BA ) workers, and leisure and hospitality saw a sharp recovery, likely due to post-hurricane reopening in Florida.
However, they add that there were softer trends, including a rise in the unemployment rate to 4.246%, partly due to slower hiring and a slight decline in labor force participation.
Retail payrolls fell by 28,000 despite strong holiday hiring plans, possibly affected by the late Thanksgiving.
Morgan Stanley says the data reflects a labor market that remains strong but is showing signs of slight cooling, as observed in marginal declines in the employment-to-population ratio and labor force participation.
"We continue to expect 25bp in Fed fund rate cuts in December," stated the bank. "The Fed remains data dependent, but the data that would be most likely to change the Fed's path are the inflation prints, which we expect tame enough to allow further rate cuts."