Job growth in the US is holding up as the economy gradually cools
The U.S. economy continued to shed jobs in November, suggesting there is still energy left in a labor market that has slowed almost imperceptibly since last year’s pandemic rebound.
Employers added 199,000 jobs last month This is reported by the Labor Office On Friday, the unemployment rate fell from 3.9 percent to 3.7 percent. The employment gains include tens of thousands of auto workers and actors who have returned to their jobs after strikes, and others in related businesses that have been brought to a standstill by the strikes, meaning underlying job growth is slightly weaker.
Still, the report indicates that the economy is still far from a recession, despite a year and a half of interest rate hikes that have depressed consumer spending and business investment. Reinforcing the picture of energetic labor demand, wages rose 0.4 percent this month, more than expected, and the working week became slightly longer.
Most analysts have been surprised by the durability of the recovery, which is due in large part to the money consumers have amassed in recent years through federal stimulus and forced savings. That has boosted service sector jobs, even as costs rise and the resumption of mandatory student debt payments.
“That’s the definition of a soft landing: it slows down slowly, and that’s what you want,” said Martin Holdrich, a senior economist at Woods & Poole Economics. However, he noted that this was strong productivity growththe persistent tightness in the labor market does not have to lead to the Federal Reserve continuing to raise interest rates.
“These numbers do not indicate an overheated economy and deficits that will drive up inflation,” Holdrich said.
The annual inflation rate recently fell to 3 percent, less than half of what it was when the Fed’s rate hikes began, and significantly lower than the current pace of wage growth. Americans seem to be noticing: Consumer confidence rose sharply in December, according to data released Friday by the University of Michigan, and respondents’ expectations about future inflation have fallen.
The Federal Reserve’s rate-setting committee meets next week and is widely expected to continue its hiatus, with market speculation shifting to when rates will be cut in 2024, and by how much. Major stock indexes moved little after the report, while bond yields rose.
Employment growth in November was broadly in line with recent months and accounted for strike activity, although October ended with a decline from an average of 240,000 jobs per month per month. There were still some during the November survey about 10,000 workers are still on strike in workplaces, including casinos and hospitals.
However, employment growth has slowed, with most of the gains coming from the services and public sectors. In November, health care added 77,000 jobs and government added 49,000 — both employers less tied to the underlying strength of the economy.
For companies that rely on the sale of physical goods, it was a different story. Manufacturers added jobs lost during the auto strikes but have otherwise stagnated since the start of the year. The retail sector lost 38,000 positions on a seasonally adjusted basis, reflecting what appears to be the situation weakest holiday rental season since 2013.
“The reason we’ve seen labor demand be more resilient than we might have thought six months ago is the structural strength of government and health care,” said Olivia Cross, who covers North America at research firm Capital Economics. “I think we expect the more cyclical sectors, where we have seen much greater weakening, to continue to weaken.”
Temporary services, often considered a gauge of labor demand, cut 14,000 jobs in November and lost 177,000 jobs over the past year, an indication that employers can handle customer requests with their permanent staff.
That certainly applies to Luke Barber. He runs an industrial packaging company in Bangor, Michigan, and most of his customers 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 built up inventories during the auto workers’ strikes in September and October, which meant he had to schedule overtime for his 70 employees and hire 30 temporary workers.
Now that the warehouses are filled, those contracts have expired. Mr. Barber has laid off his temps and is just trying to keep his staff busy. He doesn’t expect to fire anyone, but he is investing in automation to further increase his labor expenditure; the pandemic period had made it difficult to maintain a full roster, and he said he had increased wages by 25 to 30 percent since 2019.
“They say inflation is coming down at the moment, but we’re not going to go back and reverse the increases we’ve just spent,” Mr Barber said. In the coming year, he sees people buying fewer cars as auto suppliers invest more in research and development to transition their supply chains to battery-electric vehicles.
“We’re going into this cycle on the auto side with lower volumes, and you don’t have consumer demand there and you have high credit costs,” Mr. Barber said. “So I expect a little bit of tightness.”
The trajectory for most of 2023 points toward the kind of steady, painless easing that the Fed is aiming for with its interest rate policy: a record number of job openings has fallen without a worrying rise in unemployment.
Some industries that boomed during the pandemic have retreated, but others, still hungry for labor, picked up surplus workers, preventing a rise in unemployment. Entertainment, hotels and restaurants November added 40,000 jobs, but is still 158,000 jobs away from the sector’s peak in February 2020, indicating there is still room to grow.
“If a sector like wholesale or retail starts laying off workers, they could very easily move into something like leisure and hospitality,” said Michael Reid, a U.S. economist at RBC Capital Markets. “As these sectors start to see a decline in spending, we still see strength in health care and social assistance.”
While the unemployment rate is up from an all-time low earlier this year, much of that is fueled by people looking for work. The working population has grown 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 the share of people aged 25 to 54 has recovered quickly. It is increasingly clear that women in that age range, who reached record levels of participation this year, have benefited from the wider availability of remote work. If the availability of childcare and elder care continues to recover – that workforce will increase still not achieved their pre-pandemic levels – even more parents may choose to take on jobs as well.
This influx of workers, accompanied by a recovery in immigration flows, has also obscured wage increases and made it more difficult for people on the margins of the labor market to find stable jobs with decent wages.
Joshua Robinson, 33, went to trade school for massage therapy and lives in Erie, Pennsylvania. But after a few occupational injuries, including a herniated disc in his lower back from working at a trampoline park, he can no longer do anything 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 bit better when it comes to wages, but it’s still not a living wage, or what I would call a thriving wage; it’s more of a subsistence benefit,” 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 and longer performance to date, most forecasters expect a continued weakening of job growth in early 2024 as consumers draw down savings, cut spending and fill remaining labor shortages.
But that doesn’t necessarily mean a tough recession: Three in four members surveyed by the National Association for Business Economics in November thought the chance of a recession in the coming year was less than 50 percent.