Strong november jobs report keeps pressure on Fed to tighten
|Summary
Nonfarm payrolls once again blew past expectations, increasing by 263K in November. Employment gains were fairly broad-based across industries, including in cyclically-sensitive sectors like construction and manufacturing. Average hourly earnings growth was much stronger than anticipated, and new labor supply that might help put water on the fire was once again not forthcoming: the labor force participation rate fell by a tenth and is now below where it was in January.
The labor market remains far too hot for the Fed's liking, and it will take much slower growth in employment and wages to return inflation to the central bank's 2% target on a sustained basis. A downshift to a 50 bps rate hike in December seems likely, but the Fed still has a ways to go in its tightening cycle.
Payroll growth stays hot
Hiring remains on roll, at least by the standards of nonfarm payrolls. Payrolls increased by a robust 263K in November, once again easily surpassing consensus expectations for a 200K gain. On net, revisions over the past two months were fairly minimal, with a downward adjustment of -23K. Over the past three months, payroll growth has been remarkably steady between the narrow range of 263K-284K. However, the household measure of employment once again painted a bleaker picture of hiring, declining by 138K and helping to keep the unemployment rate unchanged at 3.7%. Meanwhile, layoffs are edging up and hiring plans are coming down, making us doubtful that payroll growth can maintain its current pace much longer.
Employment gains according to the establishment data were fairly broad-based across industries. Cyclically-sensitive sectors like construction and manufacturing added jobs at a solid pace, with payrolls up 20K and 14K, respectively. Leisure & hospitality employment continued its steady recovery from the pandemic, adding 88K jobs. Employment in this sector is now "only" down 980K or 5.8% from its pre-pandemic level. Payrolls also increased solidly in government, healthcare and financial activities.
Retail trade and transportation & warehousing were among the few weak spots in a sign that employers are braced for a softer year for holiday sales. Layoffs in the tech industry have made headlines over the past month or so, but there were few palpable signs of the rise in pink slips hitting headcounts. Employment in the information industry was up 19K, while payrolls in professional and technical services rose 28K.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.