US Economy Adds 263,000 New Jobs in November Despite Fed’s Rate Hikes

Andrew Moran
By Andrew Moran
December 2, 2022Businessshare
US Economy Adds 263,000 New Jobs in November Despite Fed’s Rate Hikes
A "We Are Hiring" sign is displayed on a storefront in Georgetown in Washington on Oct. 7, 2022. (Anna Moneymaker/Getty Images)

The U.S. economy added 263,000 new jobs in November, down from 284,000 in October, according to the Bureau of Labor Statistics (BLS). The market had forecast 200,000.

The September jobs report was revised down by 46,000 to 269,000, and the change for October was revised up by 23,000.

Last month, the unemployment rate remained unchanged at 3.7 percent.

Average hourly earnings edged up 5.1 percent year-over-year and rose 0.6 percent from October to November to $32.82. Average weekly hours slipped to 34.4, from 34.5. The labor force participation rate also dipped from 62.2 percent to 52.1 percent.

Leisure and hospitality led the way with 88,000 new jobs, followed by health care (45,000) and government (42,000). Construction employment rose by 20,000, information climbed by 19,000, and financial activities jumped by 14,000.

Employment in the retail trade fell by 30,000, while transportation and warehousing also lost 15,000 positions. There was little change in professional and business services, mining, and wholesale trade.

The number of people working two or more jobs increased to 7.661 million, up from 7.496 million. Long-term unemployed Americans (out of work for 27 weeks or more) stayed flat at 1.2 million and represented 20.6 percent of all jobless people. The number of people who were employed part-time but would prefer full-time hours was unchanged at 3.7 million. Individuals not in the labor force but want to work stayed the same at 5.6 million, but it was above the pre-pandemic level of 5 million.

The financial markets reacted negatively to the jobs report in pre-market trading, as the Dow Jones Industrial Average and the Nasdaq Composite Index shed about 1 percent and 2 percent, respectively.

Leading Up to the November Jobs Report

Experts believe that the red-hot labor market could be showing signs of cooling down.

This week, it started with the ADP National Employment Report that found private companies only created 127,000 jobs last month, the least since January 2021. This was also below the market forecast of 200,000. While leisure and hospitality added 224,000 new jobs, the slowdown was led by multiple sectors: manufacturing (negative 100,000), professional and business services (negative 77,000), financial activities (negative 34,000), and information (negative 25,000).

“The data suggest that Fed tightening is having an impact on job creation and pay gains. In addition, companies are no longer in hyper-replacement mode. Fewer people are quitting and the post-pandemic recovery is stabilizing,” said Nela Richardson, the chief economist at ADP, in the report.

The number of job openings did ease in October, sliding 353,000 to 10.3 million, according to recent BLS data. Moreover, the number of employees who submitted their resignation letters fell to 4.026 million.

For the week ending Nov. 26, initial jobless claims slid to 225,000. But continuing jobless claims increased to 1.608 million, while the four-week average, which removes week-to-week volatility, edged up to 228,750.

But the most notable measurement happened on Wednesday when it was revealed that U.S.-based employers cut 76,836 jobs in November, the highest since January 2021. This was also up from 33,835 in October. In addition, employers announced plans to hire more than 30,000 workers in November, lifting the year-to-date total to a little more than 1.43 million, down 14 percent from the same span a year ago.

Tech Sector Hit

“The tech sector has announced the most job cuts this year by far. While other industries are cutting jobs at a slower pace, hiring appears to have slowed as well,” said Andrew Challenger, Senior Vice President of Challenger, Gray & Christmas, Inc., in a statement.

Despite the increasing number of tech layoffs this year, John Leer, the chief economist at Morning Consult, believes that labor conditions remain resilient.

“The biggest question now is whether the rollback of excessive hiring in the tech sector is indicative of an economy-wide issue,” he noted. “Our high-frequency data shows little sign that is the case so far, and U.S. workers seem to agree.”

Still, could 2023 be the time when the U.S. labor market significantly weakens? The base case for many market analysts is a recession or, at the very least, a slowdown.

“The economy will slow into 2023—whether we actually get a recession or not (the yield curve says YES!) we are slowing,” said Nancy Tengler, CEO and CIO of Laffer Tengler Investments, in a note.

As a result, the unemployment rate could rise to about 5 percent by the end of next year, according to Jill Gonzalez, a WalletHub analyst.

Next Steps For the Fed

“This shouldn’t be surprising news, since the Fed is taking further steps to damper inflation,” she said in a report by the personal finance website. “While higher unemployment is bad for the families affected, it is good news for the economy as a whole in the current inflationary environment because it should eventually lead to a decrease in inflation. The current projections should also lead to a decrease in interest rates in 2024, once inflation has hopefully subsided enough.”

During his speech at the Brookings Institution on Wednesday, Fed Chair Jerome Powell asserted that the central bank needs to resuscitate price stability, otherwise “we will not achieve a sustained period of strong labor market conditions that benefit all.”

The Federal Open Market Committee (FOMC) will host its next two-day policy meeting on Dec. 13 and 14. According to the CME FedWatch Tool, most of the market is expecting a 50-basis-point rate hike.

Gonzalez believes unemployment should start to rise at a notable pace following the December meeting.

From The Epoch Times

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