United States: Hiring Bounced Back in November After October’s Headwinds

The weakness in the job market seen in October seems to have been a temporary hiccup. The strike in the aerospace industry, which affected approximately 40,000 workers in the manufacturing sector, and Hurricanes Milton and Helene sent job growth down to just 36,000 (revised upward from 12,000) in October. That’s the weakest employment gain since February 2019, excluding the pandemic. But November’s much stronger numbers have put all of that behind us. Of course, there is a rebound effect that will also be temporary. But we still feel that October was an exception, not the new normal.

When we take a closer look at November’s job numbers, we can even see that the manufacturing sector hasn’t entirely made up for its losses from the previous month. That includes the transportation equipment sector (of which the aerospace industry is a part). Most of the job market gains in November were in services, where the private sector created four times as many jobs as it did in October. The food services, financial and professional services sectors did particularly well. One weak spot during this holiday season was the retail sector, which lost 28,000 jobs, mostly in department stores. In all, 56.2% of the 250 sectors surveyed reported an increase in payrolls in November, compared to 53.2% in October. That’s also somewhat higher than the 54.5% year-to-date average.

We also noticed that wage pressures are still quite high. Month-over-month growth in hourly earnings has not fallen below 0.3% since July, while the annual gain remains stubbornly at 4%. The productivity of US businesses is high, so this situation doesn’t cause much concern, but it does increase the risk that inflation will stay above the Federal Reserve’s target for longer than expected. Wage gains are one of the main drivers of services inflation.

What’s more disappointing is that the household survey underperformed once again. The unemployment rate has started moving back up. It has returned to where it was back in August, but still hasn’t reached its recent July peak of 4.3%. This survey’s results are highly volatile, and therefore must be taken with a grain of salt, but the accumulated employment losses (including the 368,000 jobs lost in October) are still a bitter pill to swallow. The labour force shrank again, and the slowdown in immigration across the Mexican border in recent months may have been one of the factors driving this survey’s weak labour force and job numbers. The divergence between both surveys remains clear. The establishment survey reported an increase of 1,984,000 workers, while the household survey revealed an accumulated decline of 42,000. It remains to be seen whether the picture will look different after the annual revisions to both these surveys in January and February.

After falling in October, US job creation bounced back in November. That means the US economy still looks like it’s in good shape to deal with whatever hardships it’s facing. Steady wage growth and strong employment gains could make some members of the Federal Open Market Committee shy away from lowering rates again at their December 18 meeting. But another 25-point rate cut should still be in the cards.