Editor's Note: This report is based on survey data from November 2023 that was published in December 2023. This is the most recent data available. (Source: Bureau of Labor Statistics)
The US unemployment rate ticked down a couple tenths of a point and jobs figures were back to exceeding expectations, but a closer look at the numbers indicates only minimal disruption to the general softening trend in the labor market.
Payrolls across the United States grew by just under 200 thousand jobs, which is up from the 150 thousand jobs initially reported the month before. That said, when accounting for the at least 40 thousand striking auto workers who returned to their jobs this month, the month-to-month movement is a lot less noteworthy.
For 22 consecutive months now, the US unemployment average has remained below 4%, as it fell two-tenths of a percent from 3.9% to 3.7%.
The labor force participation rate rose slightly, up from 62.7% to 62.8%, which is very much in line with the stability we’ve seen in these numbers since summer, and the number of people classified as long term unemployed dropped below 1.2 million for the first time since July, landing at about 1.15 million.
Of the 199 thousand new jobs added across the US last month, the healthcare industry was responsible for nearly 40% of that growth accounting for 77 thousand jobs, which was a strong performance for an industry that had been averaging about 54 thousand jobs for each of the previous 12 months.
The government sector was responsible for another nearly 25% of the overall job growth with the addition of 49 thousand jobs last month, which is on track with the 55 thousand jobs that government operations had been adding on average over the last year.
The leisure and hospitality industry fell short of the 51 thousand new jobs it had been averaging over the prior 12 months, adding just 40 thousand jobs last month, while the manufacturing industry reported 28 thousand new jobs, which was pretty much right on target for its trailing 12-month average of 30 thousand new jobs per month.
Some of the other industries that saw their ranks grow last month include the social assistance industry at plus 19 thousand jobs, the information industry at plus 10 thousand jobs, and the motion picture and sound recording industries at plus 17 thousand jobs, but those mostly reflect the resumption of media production following strike resolution, as well.
The retail industry, on the other hand, saw significant losses amounting to 38 thousand jobs and the transportation and warehousing industry saw a net loss of around 5 thousand jobs despite gaining about 4 thousand jobs in the air transportation sector.
Average hourly earnings rose last month by about 12 cents (0.4%) up to $34.10 per hour.
The healthcare industry saw the largest number of new jobs, adding 58 thousand new positions, which is just above the 53 thousand that the healthcare industry has been averaging per month over the last year.
The government sector added about 50 thousand jobs as well, followed by the construction, leisure and hospitality, and social assistance industries, which added about 20 thousand jobs each.
That said, although the raw number of new jobs added was similar across these industries, they are not all trending in the same direction, with government showing steady growth, construction trending slightly up, social assistance trending slightly down, and leisure and hospitality way under the more than 50 thousand new jobs that it had been averaging over the past 12 months.
Employment in transportation and warehousing fell by about 12 thousand jobs while the information sector lost about 9 thousand jobs.
Average pay was up 7 cents (0.4%) last month to $34 per hour, which is up 4.1% on the year, while the average workweek fell by one-tenth of an hour to 34.3 hours per week while the average work week inched up by one-tenth of an hour to 34.4 hours.
Mployer's Take
At face value, the most recent jobs report makes the labor market look a bit more resilient and resurgent than it really is under the surface, but this kind of happy medium may actually be the better outcome nonetheless.
For one, when the Fed meets next week, a stronger jobs report would have increased the likelihood that another interest rate hike would be in order while most experts currently expect the Fed to abstain from another rate increase for the third consecutive time.
That said, the strength of the jobs numbers - even excluding the returning auto and entertainment industry workers - increases the probability that any future reductions in these interest rates won’t occur until the second half of 2024 at the earliest, but that is the nature of the recession-avoiding soft-landing that the Fed is targeting - finding that happy medium.
The biggest cause for concern that the Fed’s work via higher interest rates may not yet be done is the spike in average hourly wages, but an increase in the labor supply via growing participation in the workforce should help to counterbalance the effect.
We’ll know more next week about how the Fed views these developments, but the economy and job market generally seem to be in much stronger shape than most experts were predicting they would be heading into the close of 2023.
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