Employment rose by 199,000 in November, according to the latest Employment Situation Summary from the U.S. Bureau of Labor Statistics (BLS), modestly higher than economists' expectations but below the average monthly gain of 240,000 over the prior 12 months.
November's job growth was seen across several industries, but was primarily driven by healthcare and government jobs, according to BLS. Manufacturing jobs also increased, reflecting workers' return from the United Auto Workers strike.
In November, the unemployment rate edged down to 3.7% from 3.9% in October and the number of unemployed people in the country remained relatively the same at roughly 6.3 million. The unemployment rate has ranged from 3.4% to 3.9% since March 2022, according to the BLS. Average hourly earnings for private employees rose by 4% in the last year, a slight tick down from 4.1% last month.
"Today's Jobs Report confirms the residual strength of the U.S. labor market," Morning Consult Senior Economist Jesse Wheeler said. "While we've been seeing some cooling in recent months, job growth is still strong by historical standards, and the 3.7% unemployment rate reflects an economy where the vast majority of those who want a job can get a job. Critically, the report also shows nominal wage growth at a level which would be consistent with the Fed's 2% inflation target, so I don't think this report changes the calculus for next week's Fed meeting."
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Friday's report also supports the narrative that the U.S. economy may achieve a soft landing rather than a full-blown recession that economists had predicted at the start of the year. A soft landing would entail a slowdown in growth to a sustainable pace that allows the economy to level off without crashing.
According to a recent USA Today article, Moody's Analytics' forecast for a slowdown in the U.S. economy has dropped to 33% from 50%. Other economic models predicted a recession if the U.S. unemployment hit above 4%. The improved optimism over where the economy is heading is because economic and job growth have remained resilient despite the Federal Reserve's aggressive monetary policy.
"While the labor market continues to show signs of cooling, the cooling is falling in line with the soft-landing narrative – number of jobs are growing at a slower pace, wage growth also slowing down and relatively low number of lay-offs – all leading to a modest rise in unemployment rate which suggest a cooling of the U.S. economy in the coming year," CoreLogic Chief Economist Dr. Selma Hepp said.
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The November jobs report is likely enough to keep the Fed on hold. Further easing on inflation will need to happen before the central bank begins to consider cutting policy rates, according to Jim Baird, Plante Moran Financial Advisors' chief investment officer.
"Steady but solid growth in nonfarm payrolls as inflation continues to drift lower adds some credibility to the soft-landing argument but could call into question the degree to which markets have priced in meaningful rate cuts by the Fed in the coming year," Baird said in a statement. "Will the reduction in momentum and expectations for a further easing in inflation pressures be enough for the Fed to begin to take its foot off the brakes, or will policymakers need to see more to be comfortable that they've achieved their goals? That debate will continue to play out in the markets as investors vote their views."
The Fed has raised interest rates 11 times since March of last year, pushing the federal funds rate to a 22-year high of 5.25% to 5.5% to slow the economy and lower soaring inflation to a 2% target. In October, inflation rose 3.2%, evidence that disinflation is happening. However, Fed Chair Jerome Powell said in a recent statement that it is too soon to say that the Fed is done with rate increases confidently.
"It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease," Powell said in a speech delivered to students at Spelman College in Atlanta. "We are prepared to tighten policy further if it becomes appropriate to do so."
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