U.S. payrolls rose 199,000 in November, unemployment rate falls to 3.7%

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The U.S. economy created 199,000 jobs in November and the unemployment rate fell to 3.7 percent, according to data released Friday by the Bureau of Labor Statistics, reflecting the continued slowdown in the labor market.


The labor market has tightened through the end of the year with just a handful of industries, health care especially, fueling job growth, keeping the economy out of a recession that economists had widely feared just a year ago.

That softening is likely happening for a variety of reasons that should not cause concern about a broader downturn, for now, economists say. More workers are entering and reentering the labor market. Also, recently a wave of strikes, notably in the auto-manufacturing and entertainment industries, which were resolved, have created some labor market slack.

Some of the slowdown is a reaction to the Federal Reserve’s interest rate hikes. The central bank, which has lifted interest rates to the highest level in 22 years to bring down inflation, so far has achieved its goal of easing demand in the labor market and wage growth enough to bring down inflation, to 3.2 percent over the year in October, without triggering catastrophic job losses so far. Economists caution it remains too early to see the full impact of the rate hikes.

Investors are optimistic that the softening in the labor market will spur the Fed to cut rates early next year, which has spurred enthusiasm in the financial markets. Friday’s jobs report provides one of the last snapshots of the labor market before the Fed meets on Dec. 12 and 13 to consider policy on interest rates, which are designed to curb inflation.

By most measures, the labor market remains just as strong or stronger than in the years leading up to the pandemic, a period marked by low unemployment and hardy job growth. The percentage of Americans who are unemployed has been below 4 percent for two years, a sign that the labor market remains unusually favorable for workers, giving them leverage to demand raises and switch to better jobs. Layoffs also remained low in October, according to the Labor Department’s job openings survey released Tuesday, despite some concentrated pockets of job losses in finance, tech, and media.

“The current state of the labor market is a good one,” said Bunker. “For the last year plus, we’ve been talking about a normalizing labor market. We’re at the spot where that process is complete. This is a normal labor market. Things have calmed down painlessly."

Meanwhile, job openings have dropped substantially from their peak at 12 million in March 2022 down to 8.7 million jobs in October, according to the Tuesday report, in a sign that employers are no longer in a hiring frenzy. The low layoff rates and reduction in hours worked since earlier this year are signs that employers are acting cautiously, holding on to workers despite tempered demand, after years of competing for labor.

“Employers aren’t willing to close their eyes and pay for labor anymore,” said Drew Matus, chief market strategist at MetLife Investment Management. “But they’re paying attention to who and what they need. And they’re thinking what if everything gets so much better and I’m understaffed? Some of that is a hangover from the COVID experience."

Although the overall outlook remains rosy, economists have been keeping a close watch as a few key sectors, such as health care and education, buoy the labor market. The government, which has struggled since the pandemic to attract and retain workers, finally returned to its pre-pandemic levels in October, as wage growth caught up with the private sector. For months, hiring in industries such as retail, transportation and warehousing, and leisure and hospitality has seen much more sluggish and inconsistent growth.




The good news for workers is that even as wage growth has moderated since earlier this year, rising by 4.1 percent over the previous 12 months in October, inflation has slowed more, meaning average hourly earnings are beating price increases, boosting Americans’ spending power.

“This is encouraging for central bankers and the people getting real wage gains,” Bunker said. “It’s helping people spend more which is good for GDP growth and for everyone. It’s a win-win for a variety of audiences."

continues to drive gains in payrolls. Here’s what the BLS had to say:
“In November, health care added 77,000 jobs, above the average monthly gain of 54,000 over the prior 12 months. Over the month, job gains continued in ambulatory health care services (+36,000), hospitals (+24,000), and nursing and residential care facilities (+17,000).”

 The labor force participation rate picked up. That’s a good sign for the Fed. It’s now at 62.8%, matching the post-pandemic high. We are still below the pre-Covid level of 63.3%.

Manufacturing payrolls advanced in the month, with 30,000 motor vehicle and parts workers who were on strike returning to factories.

 

 

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