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Jobs bounced back in November with a strong 227,000 gain, after two hurricanes and the strike by Boeing machinists led to a weak jobs report in October. Roughly 38,000 of November’s gain was the result of the end of a strike at Boeing. It is unknown how much more of the gain was workers returning to their jobs after the hurricanes, but that trend probably played a role in the 53,000-job increase in the leisure and hospitality sector. The health care sector continued its hiring spree, adding 53,600, and state and local government continued to play catch-up after the pandemic by adding 35,000 workers. Social assistance added 18,700 jobs.
However, the labor market appeared to continue its modest softening trend in November. The unemployment rate ticked up to 4.2%. This rise is not related to any increase in layoffs, but rather to declines in the labor force over the past two months. Another caution sign is that the average length of unemployment has been trending up over the past three months. That means workers are finding it harder to get new jobs, which may be contributing to the rising number of people choosing to simply stop looking for work and drop out of the labor force. Other causes for some concern: Of the 33,300 temporary workers who lost their jobs in October because of the strike, hurricanes or any other reason, only 1,600 were rehired in November. And 28,000 retail workers lost their jobs, despite healthy retail sales growth. That may be an indication of companies attempting to protect profit margins because they are nervous about the economy’s future direction.
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Average hourly earnings continued to rise at a rate of 4.0% over the previous 12 months. Wage increases had been on a downward trend after peaking during the high inflation of 2022, but this flattening in pay gains appears to have been arrested. This may worry the Federal Reserve, given that stronger-than-expected wage growth could make it harder to bring overall inflation down to the Fed’s goal of 2%. Nevertheless, the Fed is likely to see the underlying softness in the November jobs report as more important, and thus cut short-term interest rates by a quarter-point at its next policy meeting on December 18.
A return to more-typical levels of hiring in the labor market is likely, with future monthly job gains likely to be in the 150,000 range. Eventually, state and local government agencies will refill the vacancies they experienced during the pandemic. Also, the goods-producing sector is still showing weakness. There were job losses in nondurable manufacturing, and in e-commerce delivery and warehousing. Temp jobs may continue their downtrend of more than two years. These jobs are often in the manufacturing sector and tend to be cut first when demand for manufactured goods softens.
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