US payrolls fell to 199,000 and the unemployment rate fell to 3.7%

  • Nonfarm payrolls rose to a seasonally adjusted 199,000 in November, beating the Dow Jones estimate of 190,000 and ahead of an October gain of 150,000.
  • The unemployment rate fell to 3.7%, compared to a forecast of 3.9%, as the labor force participation rate remained high.
  • Average hourly earnings, a key inflation indicator, rose 0.4% for the month and 4% from a year ago.
  • Health care was the largest growth industry, adding 77,000. Other big gainers included government (49,000), manufacturing (28,000) and leisure and hospitality (40,000).

Job creation showed little sign of slowing in November, as wages grew faster than expected and the unemployment rate fell despite signs of a weaker economy.

Nonfarm payrolls rose to a seasonally adjusted 199,000 for the month, slightly better than the Dow Jones estimate of 190,000 and ahead of an October gain of 150,000, the Labor Department said on Friday.

The unemployment rate fell to 3.7% compared to the forecast of 3.9% as the labor force participation rate rose to 62.8%. The unemployment rate, which includes discouraged workers and those holding part-time positions for economic reasons, fell 0.2 percentage points to 7%.

The department’s survey of households, used to calculate the unemployment rate, showed strong job growth of 747,000 more and 532,000 more workers in the labor force.

Average hourly earnings, a key inflation indicator, rose 0.4% for the month and 4% from a year ago. The monthly increase was slightly ahead of estimates of 0.3%, but the annual rate was in line.

Markets showed a mixed reaction to the report, with stock market futures moderately negative, while Treasury yields rose.

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“What we wanted was a strong but moderate labor market, and that’s what we saw in the November report,” said Robert Frick, corporate economist at Navy Federal Credit Union, “healthy job growth, low unemployment and decent wage growth. That points to a natural equilibrium of 150,000 jobs in the labor market.” [per month] Next year, that’s enough to keep the expansion going, and not enough to trigger a Fed rate hike.”

Health care was the largest growth industry, adding 77,000 jobs. Other big gainers included government (49,000), manufacturing (28,000) and leisure and hospitality (40,000).

During the holiday season, retail lost 38,000 jobs, half of which came from department stores. Transportation and warehousing also showed a decline of 5,000.

The length of unemployment fell sharply, falling to an average of 19.4 weeks, the lowest since February.

The report comes at a critical time for the US economy.

Although growth beat widespread expectations for a slowdown this year, most economists expect a sharper slowdown in the fourth quarter and modest gains in 2024. It says GDP will rise at a 1.2% annualized pace in the fourth quarter. Atlanta Fed data gauge and most economists expect growth of around 1% in 2024.

Federal Reserve officials are watching the jobs numbers closely as they try to curb inflation that has been soaring for four decades but shows signs of easing.

Pricing in futures markets strongly points to the Fed ending its rate hike campaign and starting to cut rates next year, although central bank officials are cautious about what lies ahead. Pricing was pointing to the first cut in March, although that changed following the jobs report, pushing a higher probability of the first cut now expected to May.

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The central bank will hold its two-day policy meeting next week, its last of the year, and investors will be looking for clues about how officials view the economy.

Policymakers aim to bring the economy to a soft landing with moderate growth, steady wage increases and inflation at least within the central bank’s 2% target.

Consumers hold the key to the American economy, and by most measures they hold it very well.

Retail sales fell 0.1% in October, but rose 2.5% from a year earlier. The numbers are not adjusted for inflation, so they indicate that consumers are at least keeping pace with higher prices. Excluding food and energy prices, the measure used by the central bank showed inflation running at an annual rate of 3.5% in October.

However, there are some concerns that the end of stimulus payments during the Covid period and continued pressure from higher interest rates could eat into spending.

Net household wealth fell by about $1.3 trillion to $151 trillion in the third quarter, due in large part to the slump in the stock market, according to Fed data released this week. Household credit increased by 2.5%, which is close to the pace seen in the past several quarters.

Central bankers are keeping a close eye on wage data. Rising prices tend to feed wages, creating a spiral that is difficult to control.

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