(Bloomberg) -- US hiring picked up in November and the unemployment rate increased, pointing to a moderating labor market rather than one that’s significantly deteriorating.
Nonfarm payrolls rose 227,000 last month following an upwardly revised 36,000 gain in October — a month constrained by storms and strikes — according to Bureau of Labor Statistics figures released Friday. Smoothing out volatility, payrolls growth over the past three months averaged 173,000 — a step down from the robust pace seen earlier this year.
The unemployment rate, which edged higher to 4.2%, indicating cooling demand for workers, with long-term joblessness at the highest in almost three years. Traders interpreted it as confirming the case for another Federal Reserve interest-rate cut when policymakers meet later this month.
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The figures, after accounting for payrolls swings related to a Boeing Co. strike and hurricanes, support the Fed’s view that the job market remains solid yet no longer a big source of inflation. While price pressures have remained elevated in recent months, officials have begun reducing interest rates to give the economy a nudge and ensure hiring is sustained.
Chair Jerome Powell said earlier this week that the central bank’s decision to start rate cuts with a half-point move in September was meant to send a “strong signal” of the Fed’s intention to support the labor market. Policymakers reverted to their usual quarter-point reduction at November’s meeting, and several have suggested it may soon be time to pause cuts as the economy proves resilient.
“The muted rebound in payrolls in November after October’s hurricanes and strikes implies that the underlying trend has continued to deteriorate,” said Samuel Tombs, chief US economist at Pantheon Macroeconomics. That bolsters the case for the Fed to cut rates again, he said.
Treasury yields slid and the S&P 500 opened higher. Traders upped bets on a Fed rate cut later this month.
Officials will also see the latest data on consumer and producer prices, as well as retail sales, before the conclusion of their Dec. 17-18 meeting.
October’s job report was particularly weak because of two severe hurricanes, when more than 500,000 people said they couldn’t work because of the weather. In November, just 56,000 reported that as an issue.
Hiring last month was led by health care and social assistance as well as leisure and hospitality and government. Retail trade cut the most jobs in a year, while transportation equipment manufacturing jobs jumped by 32,000 upon the conclusion of the Boeing strike.
The participation rate — the share of the population that is working or looking for work — fell to 62.5%, the lowest since May. The rate for workers ages 25-54, also known as prime-age workers, was little changed.
The jobs report is composed of two surveys. While the main payrolls number comes from a survey of businesses, the household survey that produces the jobless rate has its own measure of employment. That’s fallen by more than 700,000 in the last two months, the most since the onset of the pandemic.
The unemployment rate moved up amid more permanent job losses compared to temporary layoffs. There were also more people who voluntarily quit as well as joined the labor force but couldn’t immediately find work. It’s taking longer for unemployed Americans to find work — the number of people unemployed for at least 27 weeks jumped to the highest in nearly three years.
While layoffs are generally low, companies like Cargill Inc. and General Motors Co. have recently announced plans to reduce headcount.
What Bloomberg Economics Says...
“The rebound is short of what it should have been if October’s weakness were only due to temporary factors... Once all revisions to the data are in, we think they’ll show the true underlying pace of monthly job creation currently is barely positive — and well below what’s needed to stabilize the unemployment rate. That means the jobless rate will likely continue to climb.”
— Anna Wong, Stuart Paul, Eliza Winger and Estelle Ou. To read more, click here
Average hourly earnings rose 4% from a year ago for a second month, the BLS said. Wage growth for production and nonsupervisory employees, who comprise a majority of the workforce, advanced 0.3% from October.
Earnings growth has largely eased amid a substantial pool of available workers and waning demand for new hires, allowing many employers to pull back on incentives to attract talent. Other BLS data this week showed job openings picked up in October while layoffs eased, suggesting demand for workers is stabilizing.
Looking ahead, it remains to be seen how President-elect Donald Trump’s economic agenda — particularly plans for mass deportations and punitive tariffs — will impact the labor market. His appointees are also looking to slash the federal bureaucracy. That could impact government hiring, which has driven much of the broader recovery from the pandemic.
--With assistance from Chris Middleton, Vince Golle, Liz Capo McCormick and Maria Clara Cobo.
(Adds Bloomberg Economics comment)
