November Jobs Report Exceeds Expectations

Investors will now wait to see what kind of rate hike the Federal Reserve initiates at December's meeting.

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The Labor Department reported on Friday that nonfarm payrolls had increased by 263,000 in November. Dow Jones analysts had estimated 200,000 nonfarm payrolls for the month, so the number was well above what was forecast. 

Meanwhile, the unemployment rate remained at 3.7 percent, in line with expectations.

For November, average hourly wages rose by 0.6 percent, twice the estimate. The gain was double the Dow Jones estimate and marked a slight decrease from October’s revised prediction of 284,000. On an annualized basis, hourly wages were 5.1 percent higher, a little more than what was predicted at 4.6 percent. 

When including part-time positions for economic reasons and discouraged workers, unemployment is closer to 6.7 percent.

All in all, job growth was better than forecast for November despite inflation and the efforts by the Federal Reserve to slow down the labor market. The Fed has been increasing rates all year to tame inflation, which is near a 40-year high. The interest rate increases have culminated in the Fed’s benchmark rate to between 3.75 percent and 4 percent.

After the jobs report was released, the Dow Jones Industrial Average was at one point 350 points lower, stoking investor fears that the Fed might be more aggressive in its campaign. But stocks recovered and added almost 35 points to the Dow, which closed Friday’s session at 34,429.88.

The hospitality and leisure sector led the increase in jobs and added 88,000 positions. Other significant gains were seen in healthcare, government, and other services, which added 45,000, 42,000, and 24,000, respectively.

The social assistance sector also added 23,000, bringing the sector back to pre-pandemic levels. Meanwhile, construction jobs increased by 20,000, while information and manufacturing added 19,000 and 14,000 jobs respectively.

But not all sectors ended in the positive. Retail, for example, lost 30,000 jobs as the country heads into what is usually the busiest season for retailers. Warehousing and transportation also saw losses of 15,000 positions.

The Federal Reserve has raised its benchmark interest rate six times in 2022. Four of those were back-to-back 0.75 percentage point rate increases. 

But job gains continue to be strong, although lower than 2021’s pace. On an average basis, 2021 saw monthly payroll increases of 562,000 while 2022 is averaging 392,000 payrolls a month.

And, there still aren’t enough workers to fill jobs. For every available worker, there are 1.7 open job positions.

Earlier in the week, Reserve Chairman Jerome Powell said that job gains were “far in excess of the pace needed to accommodate population growth over time.” Powell hinted that wage pressures were adding to inflation concerns.

“To be clear, strong wage growth is a good thing. But for wage growth to be sustainable, it needs to be consistent with 2 percent inflation,” Powell said.

Many expect that the Fed will raise its benchmark rate another 0.5 percentage point at its next meeting this month. More increases are expected next year before the Fed evaluates how its monetary policy is impacting the American economy.



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