U.S. Labor Market Update: November Job Growth and Unemployment Rate
The U.S. economy added 64,000 jobs in November, indicating a continued slowdown in the labor market. Concurrently, the unemployment rate increased to 4.6% from 4.4% in September, marking the highest rate observed in over four years.
Context and Report Delays
This jobs report, along with October's figures, was released later than scheduled due to a six-week federal government shutdown. The shutdown impacted the Labor Department's ability to collect and process economic data.
In October, the U.S. experienced a net loss of 105,000 jobs. This decline was primarily driven by the official removal of 162,000 government workers from payrolls who had previously accepted buyouts. The unemployment rate for October remains unstated, as furloughed federal workers were unable to conduct household surveys for that month.
Sectoral Performance
During November, job growth was observed in specific sectors:
- Health care: Added 46,000 jobs.
- Construction: Added 28,000 jobs.
Conversely, some sectors experienced job reductions:
- Manufacturing: Lost 5,000 jobs in November, following a loss of 9,000 in October.
- Leisure and hospitality: Cut 12,000 jobs.
Federal Reserve Response
Concerns regarding the labor market's performance led the Federal Reserve to reduce its benchmark interest rate last week for the third time since September. Federal Reserve Chairman Jerome Powell commented on the situation, highlighting "significant downside risks" to the labor market.
Factors Contributing to Slowdown
The pace of monthly job gains has decreased notably since the beginning of the year. This slowdown is attributed to two main factors:
- Reduced employer demand: Businesses are seeking fewer new hires.
- Decreased labor force participation: Fewer individuals are actively seeking new employment.
Contributing elements to the decreased labor supply include:
- The rapid retirement rate of aging baby boomers.
- Government policies affecting immigration, which have limited the growth of the U.S. workforce.
These factors suggest that the economy requires fewer new jobs each month to maintain a stable unemployment rate.
Wages and Inflation
Average wages in November increased by 3.5% compared to the previous year, generally outpacing price increases and boosting consumer purchasing power. However, the rate of wage gains has decelerated throughout the year.
Similar to the job reports, inflation data collection was affected by the government shutdown. An overdue report on the cost of living for November is scheduled for release on Thursday.