US Employment Outlook: The forthcoming U.S. labor report for November is highly anticipated, with expectations of a rebound in job growth, thanks to the return of thousands of automobile workers and actors following recent strikes. While this may provide a short-term boost, concerns loom over the broader economic landscape, raising questions about the Federal Reserve’s approach to interest rates.
Analysts predict a notable increase of 180,000 jobs in November, compared to the 150,000 recorded in October. The conclusion of strikes by approximately 25,300 United Auto Workers (UAW) members on October 31 is a significant factor influencing this expected surge. However, it’s crucial to note that some 5,000 UAW members, predominantly at Mack Trucks, remain on strike. Additionally, the return of 16,000 members of the Screen Actors Guild-American Federation of Television and Radio Artists (SAG-AFTRA) is expected to contribute to the overall employment gains.
Despite the projected improvement, the anticipated job growth would still fall short of the monthly average of 238,800 jobs seen throughout the year. This raises concerns about a potential cooling in the labor market, attributed to the Federal Reserve’s substantial rate hikes impacting demand in the broader economy.
Data released by the government earlier this week revealed a decline in job openings, with only 1.34 job openings for every unemployed person in October, the lowest since August 2021. Anecdotal evidence from the Fed’s Beige Book report suggests a slowdown in hiring, indicating that demand for labor has “continued to ease,” with most districts reporting only modest increases in overall employment from early October through mid-November.
Temporary help, often considered a precursor to future hiring trends, has experienced a decline throughout the year. Additionally, the average workweek has seen a reduction from 34.6 hours in January to 34.3 hours in October, holding steady at this level for November. These factors contribute to the narrative of a moderating demand for workers.
Also Read: US Business Activity Holds Steady Amidst Unprecedented Employment Contraction
While some economists argue that significant portions of the economy, particularly in the service sector, remain understaffed, others believe the labor market is indeed softening. The Institute for Supply Management’s recent survey highlighted challenges in backfilling vacancies in the services industry, indicating ongoing competitive dynamics in the labor market.
Dean Maki, Chief Economist at Point72 Asset Management, remains optimistic about the underlying trend in job growth, asserting that the labor market has not experienced an abrupt slowdown. He argues that the demand for labor remains robust, particularly in sectors facing challenges in reaching full staffing levels.
One of the critical aspects of the labor report will be the trajectory of wages, as it plays a pivotal role in understanding inflation dynamics. Average hourly earnings are expected to climb by 0.3% in November, following a 0.2% gain in October. This would result in an annual increase of 4.0%, representing the smallest advance since June 2021. The expanding labor pool, contributing to the rise in the unemployment rate to nearly a two-year high of 3.9%, has implications for wage growth. The moderation in wage gains aligns with the Federal Reserve’s efforts to curb inflation, bringing it closer to its 2% target.
As the Federal Reserve considers its monetary policy stance, the employment report will play a crucial role in shaping market expectations. The Fed, having raised rates by 525 basis points since March 2022, is closely monitoring the impact of restrictive monetary policy and tight credit conditions on inflationary pressures and the broader economy.
James Knightley, Chief International Economist at ING in New York, emphasizes the importance of evidence indicating that these measures are effective in dampening inflationary pressures. While the market may be eager to interpret signs of a cooling job market as a signal for rate cuts, the Fed is likely to assess the situation with a more measured perspective, focusing on the broader economic context.
As economists await the November employment report, the divergent views on the labor market underscore the complexities facing policymakers. A potential rebound in job growth, albeit moderate, could offer relief in the short term. However, concerns about the overall economic trajectory and the potential need for further adjustments in monetary policy linger.
The expanding labor pool, coupled with challenges in certain sectors, creates a nuanced picture of the U.S. labor market. While some indicators suggest a slowdown, others point to resilience and ongoing demand for workers. As the Federal Reserve navigates this landscape, the decisions made in the coming months will have significant implications for the U.S. economy and financial markets.
In the face of uncertainty, the market will closely scrutinize the data, seeking clarity on whether the labor market is indeed cooling or if it represents a temporary phase in the broader economic landscape. The nuanced nature of these trends requires a careful and comprehensive analysis, balancing short-term indicators with a broader understanding of the economic forces at play.
Our Reader’s Queries
What is the employment trend in the US in 2023?
In 2023, the government, health care, social assistance, and construction industries saw an increase in employment, while transportation and warehousing experienced job losses. Payroll employment rose by 2.7 million, with an average monthly gain of 225,000. This is lower than the increase of 4.8 million in 2022, which had an average monthly gain of 399,000.
Is the US employment rate rising?
According to the Labor Department’s Bureau of Labor Statistics, nonfarm payrolls rose by 216,000 jobs in the previous month, surpassing the expectations of economists polled by Reuters who had predicted an increase of 170,000 jobs. However, the economy only added 2.7 million jobs in 2023, which is a significant decrease from the 4.8 million positions created in 2022.
How bad is the job market right now 2023?
According to Julia Pollak, the chief economist at ZipRecruiter, the job market had a remarkable year in 2023. Despite 500 basis points of interest rate increases in 2022 and 2023, the economy managed to avoid a widely anticipated recession. This is great news for job seekers and the overall health of the job market.
What is the employment forecast for the next 10 years?
According to BLS, the US is expected to add a mere 4.7 million jobs from 2022 to 2032, which is less than half a million jobs per year. To put this into perspective, the US added a whopping 19.4 million jobs in the decade between 2012 and 2022. This means that the projected job growth is only a quarter of what we have experienced in recent years.