Despite a bit of breather in U.S. equity markets to start last week, stocks broadly managed to bounce back to notch a sixth consecutive week of gains, the longest positive weekly streak since 2019. Jobs was the word for the week as several crucial pieces of employment data fueled further optimism that the U.S. can thread a tight needle in the year ahead, avoiding a reacceleration of inflation from economic conditions running too hot on one side and a recession from economic conditions running too cold on the other. For the week, the Dow Jones was flat while the S&P 500 and Nasdaq Composite eked out gains of 0.2% and 0.7%.

The flurry of employment data kicked off on Tuesday with the October Job Openings and Labor Turnover Survey (JOLTS), which showed that job openings fell to their lowest level since March 2021. The gap between labor demand and supply appears to be narrowing as the number of job openings per unemployed citizen has declined to 1.4 from the post-pandemic high of 2.0. Then ADP's latest employment report on Wednesday indicated that the private sector added less-than-expected jobs in November. On Thursday, the Department of Labor said that the number of Americans filing for initial jobless claims in the past week edged up, but layoffs remain at low levels relative to history.

Finally on Friday, November nonfarm payrolls came in higher-than-anticipated with 199k net new jobs added to the economy against the consensus forecast of 170k, though much of the upside was due to workers returning from strikes that weighed on October’s results. The unemployment rate stepped back down from 3.9% to 3.7% and wage growth came in a little hot as average hourly earnings ticked up 0.4% (4.0% year-over-year). The report did make market participants take a pause and slightly temper the rate cuts that they have aggressively priced in for next year beginning as soon as March. According to Bloomberg, markets now price in 1.10% of rate cuts next year compared to 1.25% before the November jobs report. However, this doesn’t alter the overall narrative that the job market is indeed gradually cooling off.

Outside of the labor market, major commodities were also in focus this past week given their large role in the falling inflation trajectory. WTI crude oil futures have continued their slide and briefly fell below $70 a barrel for the first time since early July on concerns surrounding oversupply and weakening demand.

Today’s CPI release from the Bureau of Labor Statistics confirmed the continued decline of inflation as consumer prices rose 3.1% in November over the year before, and about 0.1% compared to October. That is still higher than normal on a year-over-year basis, but it is the lowest annual increase since March 2021 and a large improvement since CPI peaked at 9.1% in June 2022. As expected, the decline in gas prices helped pull down overall inflation. Gas prices were down 6% in November from the prior month and have fallen 8.9% over the past year. Excluding food and energy prices, core CPI growth ticked up in November with a 0.3% increase (4.0% year-over-year) compared to October’s 0.2% pace.

Looking ahead, traders still widely expect the Fed to hold rates steady at this week's monetary policy committee meeting that will wrap up on Wednesday. Close attention will also be paid to the central bank's updated dot plot of economic and rate projections and what Jay Powell, the Fed chair, has to say about what might happen with rates next year, as well as the health of the economy.

Overseas, the European Central Bank and Bank of England’s will release their outlook on interest rates on Thursday. Both central banks are expected to stand pat on rates.