Jobs report shows softening but solid growth

GDP growth also defies recessionary forecast

Despite widespread fears of a recession, the U.S. economy is continuing to perform well in multiple key metrics, according to federal data released last week.

The November jobs report from the U.S. Bureau of Labor Statistics (BLS) showed that nonfarm payroll employment grew by 263,000 last month. This figure was roughly in line with the revised three-month rolling average of 272,000 job additions, and it exceeded the estimate of 200,000 new jobs by a Reuters poll of economists.
Meanwhile, the U.S. Bureau of Economic Analysis (BEA) reported that gross domestic product (GDP), or the sum of all goods and services produced, grew at an annualized clip of 2.9% in the third quarter. This represented an increase from BEA’s initial Q3 estimate of 2.6% growth, which was released in October. The agency’s third and final estimate of Q3 economic output will be released on Dec. 22.
GDP growth is poised to return to positive territory after shrinking in the first and second quarters of this year. Economic output had grown for six consecutive quarters before that.
At 3.7%, the national unemployment rate in November was unchanged from the prior month. It has remained within a band of 3.5% to 3.7% since March, BLS reported. Job growth has slowed considerably since last year, when the U.S. added 562,000 jobs per month, and recent gains also are below the 2022 monthly average of 392,000 jobs added.
“Employment gains have leveled off at a rate that is stronger than would be required to keep the unemployment rate constant over the past three months,” Fannie Mae economist Nathaniel Drake wrote on the company’s website. “This indicates labor demand remains strong, though, as we’ve noted before, labor is a lagging indicator and is unlikely to turn decisively until a recession begins.”
Leisure and hospitality led the way among all employment subsectors by adding 88,000 jobs in November, BLS reported. These types of businesses, however, remain 5.8% below their pre-pandemic employment level. And job growth in the leisure and hospitality sector has slowed from an average monthly gain of 196,000 jobs last year to 82,000 this year.
Jobs in real estate, rental and leasing grew by 13,000 last month, while the construction industry added 20,000 positions. Conversely, the retail sector shed 30,000 jobs during the month.
Average hourly wages increased by 0.6% in November and have grown 5.1% over the past year, according to BLS. Wells Fargo economists noted that annualized wage growth continues to outpace the 3% to 3.5% increases that would be consistent with the Federal Reserve’s 2% inflation target. This is one reason why the Fed is expected to increase its benchmark rate later this month, although many experts believe the recent series of 75 basis-point hikes will be lowered to a 50 basis-point bump.
“The labor market remains strong, which is a reason why the Fed will want to continue raising rates,” Wells Fargo economists wrote in online commentary. “One of the reasons why we believe the Fed will turn slightly less aggressive in the months ahead is that inflation, while still uncomfortably hot, no longer appears to be intensifying.”


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