November employment report: US job growth remains strong

The U.S. economy continued to add jobs in November, suggesting there is still energy left in a labor market that has been slowing almost imperceptibly since the pandemic surge last year.

Employers added 199,000 jobs last month, the Department of Labor reported Friday, while the unemployment rate fell to 3.7 percent, from 3.9 percent. The employment gain includes tens of thousands of auto workers and actors who returned to work after the strikes, and others in related businesses that had been left stagnant by the strikes, meaning underlying employment growth is slightly weaker. .

Still, the report notes that the economy remains far from recession territory despite a year and a half of interest rate increases that have weighed on consumer spending and business investment. Reinforcing the picture of brisk labor demand, wages rose 0.4 percent during the month, more than expected, and the work week lengthened slightly.

Most analysts have been surprised by the durability of the recovery, which is largely due to the cash that consumers accumulated during the past few years of federal stimulus and forced savings. That has boosted service industry jobs even as costs rise and mandatory student debt payments resume.

“That’s the definition of a soft landing: It’s slowing down slowly, which is what you want,” said Martin Holdrich, senior economist at Woods & Poole Economics. He noted, however, that given the strong Productivity growthPersistent tightness in the labor market need not prompt the Federal Reserve to continue raising interest rates.

“These numbers do not indicate an overheated economy and shortages that will increase inflation,” Holdrich said.

The annual inflation rate has recently fallen to 3 percent, less than half of what it was when the Federal Reserve’s interest rate increases began, and significantly lower than the current pace of wage growth. Americans seem to be taking notice: Consumer confidence rose sharply in December, according to data released Friday by the University of Michigan, and respondents’ expectations about future inflation fell.

The Federal Reserve’s rate-setting committee will meet next week and is His hiatus is widely expected to continue., and market speculation centers on when it will cut rates in 2024 and by how much. Major stock indexes moved little after the report, while bond yields rose.

November’s job gains were essentially in line with recent months, accounting for strike activity, although a step below the 240,000 jobs added per month on average over the year ending in October. During the November survey, there were still Some 10,000 workers are still on strike in workplaces, including casinos and hospitals.

However, job growth has slowed, with most gains coming from service industries and the public sector. In November, health care added 77,000 jobs and government added 49,000, both employers that are less tied to the underlying strength of the economy.

For companies that depend on the sale of physical goods, the story is different. Manufacturers have regained jobs lost during the auto strikes, but have otherwise been stagnant since the beginning of the year. The retail industry lost 38,000 jobs on a seasonally adjusted basis, reflecting what appears to be the The weakest holiday hiring season since 2013..

“The reason we’ve seen labor demand be more resilient than perhaps we thought six months ago is because of the structural strength of government and healthcare,” said Olivia Cross, who covers North America at the firm. Capital Economics research. “I think we expect the more cyclical sectors where we’ve seen much more substantial weakening to continue to weaken.”

Temporary help services, often considered a proxy for labor demand, shed 14,000 jobs in November and have lost 177,000 over the past year, an indication that employers can handle client requests with their regular staff.

That’s certainly true for Luke Barber. He runs an industrial packaging company in Bangor, Michigan, and most of his clients are automotive industry suppliers who need to store and ship their products without damage. Barber received an increase in orders as those manufacturers increased their inventories during the auto workers’ strikes in September and October, which meant scheduling overtime for its 70 employees and hiring 30 temporary workers.

Now, with warehouses full, those contracts have ended. Mr. Barber put aside his temps and is just trying to keep his staff busy. He doesn’t plan to lay off anyone, but he is investing in automation to make his labor costs go further; The pandemic period had made it difficult to maintain a full staff and he said he had increased salaries by 25 to 30 percent since 2019.

“They’re saying inflation is trending down right now, but we’re not going to go back and take back the increases we just issued,” Barber said. Next year, he predicts people will buy fewer cars as auto suppliers invest more in research and development to shift their supply chains to battery-electric vehicles.

“We’re entering this cycle in the auto sector with lower volumes, and there’s no consumer demand there, and the cost of credit is high,” Barber said. “So I anticipate a little bit of constriction.”

The trajectory through most of 2023 has pointed toward the kind of steady, painless easing that the Federal Reserve seeks with its interest rate policy: A record number of job openings have declined without a worrying rise in the unemployment rate.

Some industries that emerged during the pandemic have retreated, but others that were still thirsty for labor absorbed excess workers, helping to avoid a spike in unemployment. Entertainment, hotels and restaurants. added 40,000 jobs in November, but 158,000 jobs remain from the industry’s peak in February 2020, indicating there is still room to grow.

“If a sector like wholesale or retail starts laying off workers, they can very easily move into something like leisure and hospitality,” said Michael Reid, U.S. economist at RBC Capital Markets. “If those sectors start to see a reduction in spending, we will still see strength in health care and social assistance.”

Although the unemployment rate has slowly risen from a record low at the beginning of the year, much of that has been driven by people starting to look for work. The active population has grown by 1.16 million people since July.

The proportion of people over 55 who are in the labor force (working or looking for work) fell in 2020 and has not recovered, but those between 25 and 54 have rushed back. It has become increasingly evident that women in that age group, who achieved a record level of participation this year, have benefited from the increased availability of remote work. If the availability of child and elder care services continues to recover, those workforces I have not arrived yet their pre-pandemic levels; Even more parents may choose to take jobs as well.

That influx of workers, which includes a recovery in migration flows, has also taken the wind out of wage increases and made it more difficult for people marginalized from the labor market to find stable jobs with decent wages.

Joshua Robinson, 33, went to professional massage therapy school and lives in Erie, Pennsylvania. But after a couple of occupational injuries, including a herniated disc in his lower back from working at a trampoline park, he can’t do anything very physical. . So he looked for work from July to October, applying for about 200 jobs before landing a job as a technician at a compounding pharmacy that now pays $16 an hour.

“People are paying a little better when it comes to salaries, but it’s still not a living wage, or what I would call a prosperous one; it’s more of a subsistence level,” said Rosenthal, who lives with his mother to save money. “I know they say people are hiring, but I really don’t believe it.”

Despite the labor market’s strongest and most durable performance yet, most forecasters expect a continued weakening of job growth in early 2024 as consumers deplete savings, reduce spending and fill remaining pockets. of labor shortage.

But that won’t necessarily mean a difficult crisis: Three in four members surveyed by the National Association for Business Economics in November estimated the probability of a recession over the next year was less than 50 percent.