The U.S. economy continued to add jobs in November, suggesting there is still juice left in a job market that has been slowing almost imperceptibly since last year’s pandemic rebound.
Employers created 199,000 jobs last month, according to the The Ministry of Labor reported Friday, while the unemployment rate fell to 3.7 percent from 3.9 percent. The employment increase includes tens of thousands of autoworkers and actors who returned to work after strikes, as well as others working in related businesses that had been blocked by walkouts, which means that underlying employment growth is slightly weaker.
Even so, the report notes that the economy remains far from being in recession, despite a year and a half of interest rate hikes that have weighed on consumer spending and business investment. Reinforcing the picture for labor demand in the energy sector, wages jumped 0.4 percent for the month, more than expected, and the work week lengthened slightly.
Most analysts have been surprised by the durability of the recovery, which owes much to the cash accumulated by consumers during recent years of federal stimulus and forced savings. This has boosted service sector jobs, even in the face of rising costs and reduced mandatory student debt payments.
“It’s the definition of a soft landing: It slows down slowly, which is what you want,” said Martin Holdrich, senior economist at Woods & Poole Economics. I noted, however, that given the strong Productivity growthpersistent tensions in the labor market do not necessarily encourage the Federal Reserve to continue raising interest rates.
“These numbers do not indicate an overheating economy or shortages that would lead to higher inflation,” Mr. Holdrich said.
The annual inflation rate recently fell to 3%, less than half of what it was at the start of the Fed’s interest rate increases, and significantly lower than the current pace of wage growth. Americans seem to realize this: Consumer confidence rose sharply in December, according to data released Friday by the University of Michigan, and respondents’ expectations for future inflation fell.
The Federal Reserve’s rate-setting committee meets next week and is largely expected to continue its pause, with market speculation turning to when in 2024 it will cut rates, and by how much. Major stock indexes rose after the report was released, as did bond yields.
Job creation in November was essentially in line with recent months, taking into account strikes, although it was down from the 240,000 jobs created on average per month in the year ended October. During the November survey, there were still around 10,000 workers still on strike in workplaces, particularly in casinos and hospitals.
Job growth, however, slowed, with most of the gains coming from service industries and the public sector. In November, health care added 77,000 jobs and government added 49,000 – two employers less tied to the underlying strength of the economy.
For businesses that rely on the sale of physical goods, the situation is different. Manufacturers have added to jobs lost during auto strikes, but have been stagnant since the start of the year. The retail sector shed 38,000 positions on a seasonally adjusted basis, reflecting what appears to be the the lowest holiday recruitment period since 2013.
“The reason we’ve seen labor demand be more resilient than we thought six months ago is the structural strength of government and health care,” said Olivia Cross, who covers the North America within the research firm Capital Economics. “The more cyclical sectors where we’ve seen much more substantial weakening, I think we expect them to continue to weaken.”
Temporary help services, often seen as an indicator of labor demand, lost 14,000 jobs in November and have lost 177,000 over the past year, an indication that employers can handle the customer requests with their regular staff.
This is certainly true for Luke Barber. He runs an industrial packaging company in Bangor, Michigan, and most of his clients are suppliers to the automotive industry who need to store and ship their products without damage. Mr. Barber received a surge in orders as those manufacturers stocked up during auto workers’ strikes in September and October, necessitating overtime scheduling for his 70 employees as well as the hiring of 30 temporary workers.
Today, with the warehouses full, these contracts have ended. Mr. Barber has abandoned his temporary workers and is simply trying to keep his staff busy. It doesn’t plan to lay off workers, but it is investing in automation to increase its labor costs; The pandemic period has made it difficult to maintain a full staff, and he said he has 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 gave,” Mr. Barber said. In the coming year, he predicts people will buy fewer cars as automakers invest more in research and development to transition their supply chains to battery-electric vehicles.
“We’re entering this cycle on the auto side with lower volumes, and there’s no consumer demand in that area, and the cost of credit is high,” Mr. Barber said. “So I was expecting a bit of constriction.”
The trajectory for most of 2023 points toward the kind of steady, painless easing the Fed seeks with its interest rate policy: A record number of job openings have fallen without a worrying rise in the unemployment rate.
Some industries that emerged during the pandemic declined, but others that were still hungry for labor absorbed excess workers, helping to avoid rising unemployment. Entertainment, hotels and restaurants 40,000 jobs were added in November, but 158,000 jobs remain from the industry peak in February 2020, indicating there is still room for growth.
“If a sector like wholesale or retail starts losing workers, they can very easily move to something like leisure and hospitality,” said Michael Reid, U.S. economist at RBC Capital Markets. “While these sectors are starting to see spending declines, we still see strength in health care and social assistance.
Although the unemployment rate has risen since its historic low earlier this year, the rise has been largely fueled by people starting to look for work. The labor force has increased by 1.16 million people since July.
The share 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 come back precipitously. It has become increasingly clear that women in this age group, who reached record levels of participation this year, have benefited from the greater availability of remote work. If the availability of child care and elder care services continues to recover, these workers I still haven’t reached their pre-pandemic levels – even more parents could also choose to take a job.
This influx of workers, which includes a resumption of immigration flows, has also dampened wage increases and made it more difficult for people on the margins of the labor market to find stable, decently paid jobs.
Joshua Rosenthal, 33, attended massage therapy school and lives in Erie, Pennsylvania. But after a few work injuries, including a herniated disc in his lower back from working at a trampoline park, he is unable to do anything very physical. . So he looked for work from July to October, applying to 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 bit better in terms of salaries, but they’re still not reaching a livable wage, or what I would call prosperous; it’s more like a subsistence level,” said Mr. Rosenthal, who lives with his mother to save money. “I know they say people are hiring, but I don’t really believe it.”
Despite the labor market’s stronger performance so far, most forecasters expect a continued slowdown in job growth in early 2024 as consumers deplete their savings, cut spending and the remaining pockets of labor shortages are filling up.
But that doesn’t necessarily mean a tough economic downturn: Three in four members surveyed by the National Association for Business Economics in November say the chance of a recession within the next year is less than 50%.