The jobs report soundly beat expectations, with job gains broadly spread across the economy and about 60% higher than the 2019 monthly average.
- Since June, when the Fed began its streak of 75-basis point rate hikes, and the stock market entered bear market territory, the largest job losses have been in:
- General merchandise stores: -70.4k
- Warehousing and storage: -63.5k
- Business support services: -42.5k
- Temporary help services: -33.1k
- Nondepository credit intermediation: -29k
But those losses have been more than offset by gains in:
- Health care and social assistance: 383.6k
- Accommodation and food services: 315.1k
- Government: 240k
- Professional and technical services: 148.7
- Manufacturing: 148.7k
- Job growth is being propped up by continued strength in personal income and consumer spending, as well as by continued recovery in industries still operating well below pre-pandemic strength.
Wage growth came in twice as high as expected and sent the stock market into a tailspin. The current pace of wage growth is incompatible with the Fed’s inflation target and raised the likelihood that the Fed would keep interest rates elevated for longer.
- After signs in last month’s report that wage growth would moderate, the November report showed a large increase. There are several reasons for persistent wage growth pressures:
- The labor market remains extremely tight, with employers experiencing acute shortages of qualified candidates, especially in hourly roles.
- The past 18 months of rapid wage growth have set expectations among job seekers. A new ZipRecruiter survey of workers hired in the past 6 months found that 43% of new hires received double-digit wage increases.
- New pay transparency laws are prompting many companies to raise the wages of existing employees so that they match the pay ranges they’re now disclosing in job postings. Companies feel pressure to post high ranges to win the war for talent but risk upsetting existing employees unless they bring their compensation in line with the new ranges.
- Labor unions continue to be highly active. In response to strikes and threatened strikes, many employers are conceding and providing the wage increases workers are demanding, knowing that they will not be able to replace striking workers in a tight labor market.
- Wage gains for nonsupervisory workers in leisure and hospitality recorded double-digit growth rates over the last 2 months, 11.7% in November, and revised up to 10.0% in October, over the past 12 months. Industry workers are recording above-inflation-rate job gains since August 2021.
Businesses are unlikely to see their hiring challenges ease due to continued weakness in labor force participation.
- Not only did many workers leave the labor force during the pandemic, but workers continue to leave. Labor force participation rate ticked down by 0.1 percentage points to 62.1%. Low participation in the face of strong demand will continue to fuel wage growth pressures.
- Sickness is still holding people back. In November, 1.6 million were employed but out of work due to their own illness, 261k more people than last month, and 83k more people that at the same time last year.
Despite strength in the establishment survey, there were several mixed signals in the jobs report.
- Employment in temporary help services has now fallen for three straight months, according to revised numbers. The industry lost 17.2k jobs in November and a total of 23.3k jobs over the last three months. That industry is typically a bellwether, losing jobs ahead of a recession.
- In addition to the losses in employment services (which includes the temporary help services), business support services recorded 10.8k job losses in the month, likely the result of cost-cutting measures at tech companies. Interest-rate-sensitive businesses are cutting nonessential expenses to prepare for a potential downturn and boost profit margins.
- Finally, there was a large gap between employment growth in the establishment and household surveys. Historically, the household report has deteriorated first heading into downturns.