Is labor market bouncing back? Here's what the November jobs report tell us.

Is labor market bouncing back? Here’s what the November jobs report tell us.

Posted by Admin December 6, 2024 Jobs

U.S. hiring bounced back in November with employers adding 227,000 jobs as the adverse toll on payrolls from two Southeast hurricanes and worker strikes largely reversed.

The unemployment rate rose from 4.1% to 4.2%, the Labor Department said Friday.

Economists surveyed by Bloomberg had forecast 215,000 job gains.

Also encouraging: Job gains for September and October were revised up by a total 56,000. September’s tally was upgraded from 223,000 to 255,000 and October’s, from 12,000 to 36,000. The changes paint a modestly brighter picture of the job market in late summer and early fall than previously believed.

“The November jobs report should assuage fears of recession,” Jason Schenker, president of Prestige Economics, wrote in a note to clients.

How do hurricanes affect jobs?

Employers added just 36,000 jobs in October as Hurricanes Helene and Milton idled about 70,000 workers, according to Goldman Sachs estimates. About 50,000 of those employees were likely back at work last month, the research firm said.

Meanwhile, strikes at Boeing and a smaller aircraft maker reduced October employment by 38,000 and the return of those workers should have boosted last month’s payrolls by a similar number, according to Goldman and Oxford Economics.

Bank of America expected a somewhat larger bump to November job gains of about 100,000 or more.

Yet uncertainty about the storms’ precise effects could make it challenging for the Federal Reserve to gauge the labor market’s underlying health as it weighs another interest rate cut at a meeting this month.

Most, but not all, of the weather effects likely unwound last month, Goldman said. And just 47% of employers responded to the Labor Department’s October jobs survey.

Manufacturing payrolls reversed only about half of October’s decline due to the aircraft strikes, said economist Stephen Brown of Capital Economics. That suggests the total boost to November payrolls from the unwinding of the impact from the storms and walkouts was about 70,000, below the 90,000 anticipated, he said. And that would mean job gains, excluding the one-time rebound effects, totaled a sturdy 157,000, Brown said.

Others took a more dour view. Employment gains averaged just 132,000 in October and November – a period that theoretically includes the hurricanes and strikes as well as the recovery – a pronounced downshift from the average 159,000 monthly jobs added in the third quarter, said Julia Pollak, chief economist of ZipRecruiter, a top jobs board.

Are US wages growing?

Average hourly pay rose 13 cents to $35.61, keeping the yearly increase at 4%.

Pay increases have slowed as pandemic-related worker shortages have eased. Economists have said yearly wage growth needs to fall to 3.5% to align with the Fed’s 2% inflation goal.

But strong growth in productivity – or output per worker – could allow companies to give raises closer to 4% without passing their higher costs to consumers through higher prices, economists have said.

Is the Fed going to cut rates again?

The report leaves the Federal Reserve on course to cut its key interest rate by a quarter percentage point again this month, as most economists have expected, amid a generally cooling labor market and easing inflation.

But because of the storm and strike effects, Fed Governor Christopher Waller said this week that November’s report could be misleading. And Barclays said officials likely would focus on average job gains the past three months rather than the November total. The three-month average was a solid, but not too hot, 172,000.

With a key inflation measure staying elevated in recent months, the Fed is expected to look even more closely at next week’s report on November price increases.

In 2022 and 2023, the Fed hiked its key interest rate to a 23-year high of 5.25% to 5.5% to fight inflation. With annual inflation falling from 9.1% in mid-2022 to less than 3% recently – closer to the Fed’s 2% goal – officials lowered the benchmark rate by a total three-quarters of a percentage point in September and November.

Another decrease is likely this month as the central bank brings the rate closer to historically normal levels. But futures markets expect the Fed to slow the pace of cuts next year because of a more gradual inflation drop-off, and President-elect Donald Trump’s promised new tariffs and immigration crackdowns, which are likely to constrain the labor supply and push up wage growth.

Which industries are adding jobs?

Health care led the job gains with 54,000. Leisure and hospitality, a sector clobbered by the hurricanes, bounced back with 54,000 new jobs. Federal, state and local governments added 33,000; professional business services, 26,000; and manufacturing, 22,000.

But retail lost 28,000 jobs after seasonal adjustments, a sign that holiday hiring was weak compared to previous years.

How is the US job market right now?

More broadly, even before the hurricanes and strikes, U.S. job growth was slowing from a monthly average of 267,000 in the first quarter. An immigration surge fueling labor force growth has downshifted substantially following a Biden administration clampdown at the Southern border.

And inflation and high interest rates have squeezed low- and middle-income Americans, leading those households to drive record U.S. credit card debt and elevated delinquencies.

At the same time, higher-income consumers continue to spend briskly amid solid wage growth, underpinning an economy that most forecasters say should avoid a recession.

Still, Trump’s threats to impose 25% tariffs on imports from Mexico and Canada and deport millions of immigrants who lack permanent legal status will push up inflation and weaken the economy and job market next year, according to Pantheon Macroeconomics and Nomura.

At the same time, Trump’s proposal to extend the tax cuts he spearheaded in 2017 likely will lift growth in 2026, Oxford Economics says.

(This story was updated to add new information.)