The U.S. added 199,000 jobs in November and the unemployment rate fell to 3.7%

Job creation showed little signs of a let-up in November, as payrolls grew even faster than expected and the unemployment rate fell despite signs of a weakening economy.

Nonfarm payrolls rose by 199,000 for the month, slightly better than the 190,000 Dow Jones estimate and ahead of the October gain of 150,000, the Labor Department reported Friday.

The unemployment rate declined to 3.7%, compared to the forecast for 3.9%.

Average hourly earnings, a key inflation indicator, increased by 0.4% for the month and 4% from a year ago. The monthly increase was slightly ahead of the 0.3% estimate, but the yearly rate was in line.

Markets showed mixed reaction to the report, with stock market futures modestly negative while Treasury yields surged.

Health care was the biggest growth industry, adding 77,000. Other big gainers included government (49,000), manufacturing (28,000) and leisure and hospitality (40,000).

Heading into the holiday season, retail lost 38,000 jobs, half of which came from department stores. Transportation and warehousing also showed a decline of 5,000.

Duration of unemployment fell sharply, dropping to an average 19.4 weeks, the lowest level since February.

The report comes at a critical time for the U.S. economy.

Though growth defied widespread expectations for a recession this year, most economists expect a sharp slowdown in the fourth quarter and tepid gains in 2024.

Federal Reserve officials are watching the jobs numbers closely as they continue to try to bring down inflation that had been running at a four-decade high but has shown signs lately of easing.

Futures markets pricing strongly points to the Fed halting its rate-hiking campaign and beginning to cut next year, though central bank officials have been more circumspect about what lies ahead. Pricing had been pointing to the first cut happening in March, though that swung following the jobs report, pushing a higher probability for the first expected cut now to May.

The Fed will hold its two-day policy meeting next week, and investors will be looking for clues about how officials view the economy.

Policymakers have been looking to bring the economy in for a soft landing that likely would feature modest growth, a sustainable pace of wage increases and inflation at least progressing back to the Fed’s 2% inflation target.

Consumers hold the key to the U.S. economy, and by most measures they’ve held up fairly well.

Retail sales fell 0.1% in October but were still up 2.5% from the previous year. The numbers are not adjusted for inflation, so they indicate that consumers at least have nearly kept pace with higher prices. A gauge the Fed uses showed inflation running at a 3.5% annual rate in October, excluding food and energy prices.

However, there is some worry that the Covid-era stimulus payments and the continued pressure from higher interest rates could eat into spending.

Net household wealth fell by about $1.3 trillion in the third quarter to about $151 trillion, owing largely to declines in the stock market, according to Fed data released this week. Household debt rose 2.5%, close to the pace of the past several quarters.

Fed officials have been watching wage data closely. Rising prices tend to feed into wages, potentially creating a spiral that can be difficult to control.