U.S. labor market shrugs off recession fears; keeps Fed on tightening path

  • Nonfarm payrolls increased 263,000 in November
  • The unemployment rate continues at 3.7%; Participation rates are falling
  • Average hourly earnings increased 0.6%; changed +5.1% per year

WASHINGTON, Dec 2 (Reuters) – U.S. employers hired more workers than expected in November and increased wages, dispelling growing fears of a recession, but that will not stop the Federal Reserve from reducing the pace of interest rates starting this month. .

Despite strong job growth, some details of the Labor Department’s jobs report on Friday looked weak, which economists said could reflect a weak labor market and – the upcoming. Household employment declined for the second straight month. About 186,000 people left the workforce, keeping the unemployment rate unchanged at 3.7%.

The pressure on the market forces the Fed to close the door on its monetary policy at least through the first half of 2023, and may raise its policy rate to a higher level where it may stay for a while. It also shows that the stability of the economy is expected to be a difficult year.

Jan Groen, chief U.S. macro strategist at TD Securities in New York, said, “November’s labor market report is clearly bad news for the Fed’s war on inflation. “The Fed has no other option than to remain in an expansionary position for the foreseeable future, and 50 point hikes in December and February.”

Nonfarm payrolls increased by 263,000 jobs last month. Data for October was revised higher to show wages rising 284,000 instead of 261,000 as previously reported. A monthly job growth of 100,000 is required to keep up with the growth of the workforce.

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Economists interviewed by Reuters had forecast wages increasing by 200,000. Estimates range from 133,000 to 270,000. Job growth is expected to reach 392,000 per month this year compared to 562,000 in 2021.

Hiring remains tight despite announcements of thousands of job cuts by tech companies, including Twitter, Amazon ( AMZN.O ) and Meta ( META.O ), the parent of Facebook.

Economists say that these companies are over-sized after having more money during the COVID-19 pandemic, noting that smaller companies are in desperate need of workers.

There were 10.3 million job openings at the end of October, with 1.7 job openings for every unemployed person, most of them in the entertainment and hospitality and health care and human services industries.

The biggest gain in employment last month was the entertainment and hospitality sector, which added 88,000 jobs, most of them in restaurants and bars. Leisure and hospitality jobs are still down 980,000 from their pre-pandemic levels.

There were 45,000 jobs added in health, while government wages increased by 42,000. Construction employment increased by 20,000 jobs despite the housing market turmoil, while manufacturing added 14,000 jobs.

But retail employment fell by 30,000 jobs, with more losses in the general merchandise industry. Transportation and warehousing costs were reduced by 15,000 jobs. Temporary help jobs, a sector often considered a future employer, decreased by 17,200.

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Nick Bunker, director of economic research at the Real Estate Research Institute, said, “Jobs may encounter some bumps in the road next year, but it’s on track for a 2023 cruise.”

Fed Chairman Jerome Powell said on Wednesday that the US central bank could reduce the pace of its rate hike “as soon as December.” The Fed has raised its policy rate by 375 basis points this year from near zero to 3.75%-4.00% in the fastest rate hike since the 1980s.

Lawmakers meet on Dec. 13 and 14. Attention now turns to consumer price data for November through December. 13.

Stocks on Wall Street fell. The dollar rose against a basket of currencies. US Treasury prices are low.

WORLD WAR

With the labor market still strong, average hourly earnings increased 0.6% after rising 0.5% in October. That lifted annual wage growth to 5.1% from 4.9% in October. Salary growth rose to 5.6% in March.

Reuters graphics

The broad wage gains indicate that the compliance with inflation, evident in the October data, will be slower. Economists said that this raised concerns about the cost of labor which could lead to rising labor costs outside of the housing sector. Fed officials have stopped naming wage rates.

Andrew Hollenhorst, chief US economist at Citigroup in New York, said, “the concentrated nature of the increase and its consistency with other data on wages lead us to think that up to 5% average hourly earnings are growing growth is not miserable.”

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Strong wage gains are helping boost consumer spending, which rose in October, leading economists to believe that the expected recession next year will -short and shallow. But there are some signs of weakness emerging in the labor market.

Family employment fell by 138,000 jobs, the second monthly decline. Although domestic work is worse as compared to non-agricultural wages from a small sample, economists said that the difference between the two measures is important to watch.

Sophia Koropeckyj, an economist, said, “Housing surveys can be better at identifying changes in the labor market than wage surveys, since wage surveys cannot accurately capture employment and the opening and closing of the office when the family investigation is possible.” Moody’s Survey in West Chester, Pennsylvania.

Others, however, argued that non-agricultural work is a better sample of work that is expected to be linked to payroll.

The participation rate, or the proportion of Americans who are working or looking for one, dropped to 62.1% from 62.2% in October. Some of the decline in home employment and participation may be due to illness, with 1.6 million people claiming to be out of work due to illness, up 265,000 from October.

The participation rate for Americans 55 years and older fell, perhaps reflecting retirement. The employment-to-population ratio fell to 59.9% from 60.0% in October.

Statement by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci

Our principles: Thomson Reuters Trust Principles.

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