Employment growth far exceeded expectations in November, despite the Fed’s aggressive efforts to combat a slowing labor market and inflation.
Non-farm payrolls increased by 263,000 in the month and the unemployment rate was 3.7%, the Labor Department reported on Friday. Economists surveyed by Dow Jones said he wanted an increase of 200,000 in employment and a 3.7% increase in the unemployment rate.
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Monthly profits were down slightly from October’s revised upwards of 284,000. The broader unemployment rate, which includes depressed workers and those holding part-time jobs for economic reasons, fell to 6.7%.
The numbers are unlikely to slow the Fed, which has been steadily raising interest rates this year to keep inflation near its highest level in more than 40 years. The rate hike brought the Fed’s benchmark overnight borrowing rate into its target range of 3.75% to 4%.
In another blow to the Fed’s fight against inflation, average hourly wages jumped 0.6% over the month, double the Dow Jones estimate. Wages rose 5.1% year-over-year, well above his 4.6% forecast.
The Dow Jones Industrial Average fell as much as 350 points after reports on fears that hot jobs data could make the Fed even more aggressive. However, the stock cut most of its losses as the trading session drew to a close. Bond yields initially jumped on job news, but later turned mixed.
“Adding 263,000 jobs, even after some countries raise their policy rates. [375] “Basis points are no joke,” said Seema Shah, chief global strategist at Principal Asset Management.
Leisure and hospitality led employment growth, adding 88,000 jobs.
Other sectors, including healthcare (45,000), government (42,000), and other services (categories that include personal and laundry services), showed a total increase of 24,000. Social assistance increased by 23,000 and the sector is back to where it was in February 2020 before the Covid pandemic, according to the Labor Department.
Construction added 20,000 positions, Information increased by 19,000, and Manufacturing saw an increase of 14,000.
On the downside, retailers reported losing 30,000 positions to the busy holiday shopping season. Transportation and warehousing also fell, down 15,000.
The figure comes from the Fed’s six rate hikes this year, including four consecutive 0.75-point hikes.
Despite the move, employment gains have been strong this year, albeit at a slightly slower pace than 2021’s rapid pace. Monthly employment has increased by an average of 392,000 compared to 562,000 in 2021. Demand for labor continues to outstrip supply, with approx. 1.7 positions open to all available employees.
“The Fed is tightening monetary policy, but someone forgot to tell the labor market,” said Brian Coulton, chief economist at Fitch Ratings. This is a sign of a solid return to growth, but continued job growth at this rate will not alleviate the imbalance in labor supply and demand that the Fed is concerned about.
Earlier this week, Fed Chairman Jerome Powell said job growth “far exceeds the pace needed to keep pace with population growth over time,” and said wage pressures are contributing to inflation. rice field.
“To be clear, strong wage growth is good. But for wage growth to be sustainable it needs to be in line with 2% inflation.”
The market expects the Fed to raise its benchmark rate by half a percentage point at its meeting later this month. According to current market prices and statements from several central bank officials, there are several more in 2023 before the central bank pauses to see how policy moves affect the economy. Interest rates are likely to continue to rise.
Friday’s numbers will have little impact on interest rate forecasts, with traders projecting a nearly 80% chance that the Fed will cut rates to a half-point hike, according to CME Group data.
“The economy is big and it will take a long time, many months, for these to seep in,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab. “The impact of these rate hikes is not really being felt yet, so it’s no surprise that Powell is a little cautious.”
Powell has stressed the importance of returning labor force participation to pre-pandemic levels. However, the November report showed that as the labor force fell by 186,000 and is now just below February 2020 levels, the participation rate has fallen by a tenth of a percentage point to 62.1%, and this year’s is aligned with the lowest level of
