U.S. labor market shrugs off recession fears; keeps Fed on tightening path

  • Nonfarm payrolls rose 263,000 in November
  • The unemployment rate is steady at 3.7%; The participation rate has decreased
  • 0.6% increase in average hourly earnings; 5.1% increase year on year

WASHINGTON, Dec 2 (Reuters) – U.S. employers hired more workers than expected in November and raised wages, easing fears of an economic downturn, but that will not stop the Federal Reserve from It slowed the pace of interest rate hikes earlier this month. .

Despite the strong job growth, some details of the closely watched Labor Department employment report on Friday were slightly weaker, which economists said could be a sign of a weaker labor market going forward. Household employment declined for the second straight month. About 186,000 people left the labor force, leaving the unemployment rate unchanged at 3.7%.

Labor market stability and strength The Fed maintains its monetary policy tightening path through at least the first half of 2023, and could raise its policy rate to higher levels where it could remain for some time. It also indicates the resilience of the economy in what is expected to be a tough year.

“The November labor market report was clearly bad news for the Fed’s fight against inflation,” said John Gruen, chief U.S. strategist at TD Securities in New York. “The Fed has no choice but to remain dovish for the foreseeable future, with 50 basis point hikes in December and February.”

Nonfarm payrolls increased by 263,000 last month. Data for October was revised upward to show payrolls rose by 284,000 instead of 261,000 as previously reported. 100,000 monthly job growth is needed to keep pace with growth in the labor force.

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Economists polled by Reuters had predicted wages would rise by 200,000. Estimates ranged from 133,000 to 270,000. Hiring growth averaged 392,000 per month from 562,000 in 2021.

Hiring has remained strong despite announcements of thousands of job cuts by technology companies, including Twitter, Amazon ( AMZN.O ) and Meta ( META.O ), the parent of Facebook.

Economists say these companies are scaling back after heavy hiring during the COVID-19 pandemic, pointing out that small firms remain desperate for workers.

There were 10.3 million job openings at the end of October, with 1.7 openings for every unemployed person, mostly in the entertainment and hospitality as well as health care and social assistance industries.

Employment gains last month were led by the leisure and hospitality sector, which added 88,000 jobs, mostly in restaurants and bars. Leisure and hospitality jobs remain 980,000 below their pre-epidemic levels.

Health care added 45,000 jobs, while government payrolls increased by 42,000. Despite turmoil in the housing market, construction added 20,000 jobs, while manufacturing added 14,000 jobs.

But retail business employment fell by 30,000 jobs, with most of the losses at general merchandise stores. Transportation and warehousing wages fell by 15,000 jobs. Temporary help jobs, a segment commonly considered a hindrance to future hiring, fell by 17,200.

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“The labor market may face some bumps in the road next year, but it’s on the way to 2023,” said Nick Bunker, director of economic research at the Real Employment Lab.

Fed Chairman Jerome Powell said on Wednesday that the US central bank could reduce the pace of its rate hikes in December. The Fed has raised its policy rate this year by 375 basis points from near zero to a 3.75%-4.00% range in the fastest period of rate hikes since the 1980s.

Policymakers are meeting on December 13 and 14. Attention now turns to the November 13 consumer price data.

Stocks fell on Wall Street. The dollar rose against a basket of currencies. US Treasury prices were lower.

Wages accelerate

With the labor market still tight, average hourly earnings increased 0.6% after a 0.5% advance in October. This lifted annual wage growth to 5.1% from 4.9% in October. Wage growth rose to 5.6% in March.

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Broad wage gains suggest that the moderation in inflation, seen in the October data, will be gradual. Economists said it also raised concerns about a wage-price spiral that could keep prices for services outside the sheltered sector high. Fed officials have refrained from calling a rate-wage spiral.

“The broad-based nature of the increase and its consistency with other wage data lead us to think that average hourly earnings growth of around 5% is not a hurdle,” said Andrew Hollinhurst of Citigroup’s U.S. in New York. The chief economist said.

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Strong wage gains are helping to drive consumer spending, which rose in October, leading economists to believe next year’s projected deficit will be shorter and lower. But there are some signs of weakness in the labor market.

Household employment fell by 138,000 jobs, the second straight monthly decline. Although household employment is volatile because it is drawn from a smaller sample than nonfarm payrolls, economists said it is important to distinguish between the two measures.

“Household surveys may be better at capturing turning points in the labor market than wage surveys, because wage surveys cannot capture firm openings and closings as well as household surveys. can,” said Sophia Kuropackij. Moody Analytics in West Chester, Pennsylvania.

However, others argued that off-farm wages were a good measure and were expected to be combined with wages for household duties.

The participation rate, or the proportion of working-age Americans who have a job or are looking for work, fell to 62.1% from 62.2% in October. Some of the decline in family employment and participation was likely due to illness, with 1.6 million people saying they were absent from work because they were sick, up 265,000 from October.

Participation rates have declined for Americans age 55 and older, which may reflect retirement. The employment-to-population ratio fell to 59.9% from 60.0% in October.

Reporting by Lucia Moticani; Editing by Chizu Nomiyama and Andrea Ricci

Our Standards: The Thomson Reuters Trust Principles.

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