Employers added 199,000 jobs last month, underscoring the ongoing strength of the U.S. labor market. The unemployment rate fell to 3.7%, while labor force participation increased to 62.8%. However, some indicators of wage growth continued to rise, which could put further upward pressure on overall prices and the rate of inflation.
Jobs Report Shows Continued Strength in November
199,000 Jobs Added in November While Unemployment Dropped to 3.7%
Top Takeaways from the Report
Job Growth Above Expectation in November
According to the Labor Department, employers in the United States added 199,000 net new jobs in November, a sign that the labor market remains strong. This is up from the October job growth reading of 150,000 and is slightly higher than the 180,000 jobs that analysts had expected.
The November report reflects an addition of approximately 40,000 workers who were striking in the automobile manufacturing and entertainment industries, along with jobs closely related to these industries. The Labor Department also lowered the estimated growth over the previous two months by a net 35,000 jobs.
The unemployment rate decreased in November, falling to 3.7% from 3.9% in October. Although this rate is higher than earlier in the year, it indicates that the labor market remains historically tight. Unemployment is now only slightly higher than it was in January 2020, before the significant disruptions caused by the COVID-19 pandemic.
In addition to the positive job growth, the labor force participation rate increased to 62.8% in November, up from 62.7% the previous month. The labor force participation rate is the percentage of the working-age population that is employed or actively looking for work. A strong labor market should attract more workers to fill job vacancies. While labor force participation has been trending higher over the past few years, it remains below the 63.3% rate that prevailed before the pandemic.
Wage growth had mixed results in November. Year-over-year wage growth remained unchanged at 4.0%, meeting expectations. However, month-over-month wage growth accelerated to 0.4%, up from 0.2% the previous month. This unexpected strength in short-term wage growth indicates that employees continue to have bargaining
power with employers.
Real wage growth was negative for most of 2021 and 2022 as price increases outpaced wage increases. However, since the spring of 2023, wage growth has exceeded price increases, a positive sign that consumer buying power is recovering.
One of the main requirements for the economy to return to normal is a return of inflation back to the Federal Reserve’s target of 2% annual price increases. At 3.2%, inflation is down significantly from a year ago when it peaked at nearly 9%, but it remains above the Fed’s target.
While inflation is down, prices remain elevated compared to before the pandemic. The dynamic of higher inflation coupled with overall higher prices has weighed on consumer confidence, as individuals and families struggle to keep up with price increases. And while inflation in the goods sector has cooled, service sector inflation remains much higher and is preventing overall inflation from dropping back to normal levels.
Growth by Industry
Industries experienced mixed job growth during November. Those leading the gains were education and health services (+99,000); government (+49,000); and leisure and hospitality (+40,000). By contrast, the industries with the largest decline in jobs were trade, transportation, and utilities (-35,000); professional and business services (-9,000); and mining and logging (-1,000). Private payrolls increased by 150,000, with goods-producing industries increasing by 29,000 and service-providing industries increasing by 121,000.
The Bottom Line
The jobs report reflected continued strength in the U.S. labor market, with job growth above expectations, a drop in the unemployment rate, and increasing labor participation. While still elevated, wage growth is slowly returning back to its long-term trend. All eyes are now turning to next week’s key economic events: the release of the Consumer Price Index and the Federal Reserve’s monetary policy meeting. How inflation and interest rate decisions unfold will significantly impact the future trajectory of this resilient labor market.
Bond markets have recently been pricing in a pivot in Fed policy, with traders expecting the Fed to drop interest rates early next year. However, Jerome Powell has stressed the need to keep rates higher for longer, to slow economic growth below its trend. This jobs report supports Chairman Powell’s argument that the economy remains resilient and can support higher interest rates.
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