Labor market stays hardy even as November job growth slows

Consensus expectations surpassed with nearly 200,000 new jobs added

The hardy U.S. labor market continued its robust run in November with 199,000 new jobs added, besting expectations and improving on October’s increase by 49,000 positions, according to the newest establishment survey data from the U.S. Bureau of Labor Statistics.

Part of the increase was expected, with formerly on-strike personnel in the entertainment and auto manufacturing sectors returning to work and boosting the gain. Economists polled by Reuters anticipated 180,000 additions, while the Dow Jones estimate stood at 190,000 new jobs. A healthy November helped to pull the unemployment rate back down to a four-month low of 3.7%, which might allay concerns by some observers that last month’s 3.9% figure — the highest in two years — was a recessionary warning sign.

Notable gains occurred in the health care and government sectors, with the former adding 77,000 jobs and the latter chipping in another 49,000 new hires. Leisure and hospitality hiring continued its upward trend as well, with almost all of the 40,000 new jobs during the month coming from food and drink establishments. The end of the aforementioned auto worker strike, meanwhile, helped bolster manufacturing numbers, with motor vehicle and auto parts manufacturing employment picking up 30,000 jobs in November.

Despite the favorable figures, however, it remains clear that the labor picture is slowly but steadily weakening. Hiring trends remain on a decelerating pace as November’s total gain ran handily below the past year’s monthly average of 240,000. Average hourly earnings, which rose 0.4% in November after a 0.2% decline one month prior, remain historically healthy (and still too strong to bring inflation down to the Federal Reserve’s 2% goal). But year over year, average hourly earnings are up 4%, down from 5% growth at this time last year. More slowing could be in the cards too, given that for the past three months, the annualized growth of earnings has slid to 3.4%.

It’s an interesting middle ground for the Fed to navigate, with evidence mounting that a drastic recession has probably been averted. Inflation has clearly cooled, but not enough to hit the brakes completely. With the central bank’s policymaking Federal Open Market Committee set to convene for its final two-day meeting of the year next week, the question is whether the economy will dodge a final, exclamatory interest rate hike in 2023.

“Overall, recent labor market data is signaling that a ‘soft landing’ scenario is increasingly likely. While job openings have pulled back, layoffs remain low. More labor supply takes the pressure off wages and makes finding new workers easier,” said Ksenia Potapov, economist at First American Financial Corp.

“November’s jobs report broadly signals that the labor market is cooling but remains strong, which is good news for the Fed and means that the likelihood of another rate hike remains low.”


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