U.S. job growth likely picked up; unemployment rate seen
at 20-month low
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[December 03, 2021] By
Lucia Mutikani
WASHINGTON (Reuters) - U.S. employers
likely stepped up hiring in November as they scrambled to meet strong
demand for goods and services, giving the economy a strong boost as
another challenging year draws to a close, though worker shortages
remained a constraint.
The Labor Department's closely watched employment report on Friday is
expected to show a rapidly tightening jobs market, with the unemployment
rate seen falling to a 20-month low of 4.5% and wages increasing
further. It would come days after Federal Reserve Chair Jerome Powell
told lawmakers that the U.S. central bank should consider speeding up
the winding down of its massive bond purchases at its Dec. 14-15 policy
meeting.
"There is clearly massive demand out there for workers. The bigger issue
is the supply to meet that demand," said James Knightley, chief
international economist at ING in New York. "If supply doesn't show any
meaningful increase, that would suggest we are going to be in a
situation where the labor market is going to continue to add to upside
inflationary pressures."
Nonfarm payrolls likely increased by 550,000 jobs last month after
rising 531,000 in October, according to a Reuters survey of economists.
That would leave employment about 3.7 million jobs below its peak in
February 2020. Estimates ranged from as low as 306,000 to as high as
800,000 jobs.
Strong employment gains would add to solid consumer spending and
manufacturing data in suggesting that the economy was accelerating after
hitting a speed bump in the third quarter. They would also put an early
interest rate increase from the Fed on the table. The Omicron variant of
COVID-19, however, poses a risk to the brightening picture.
While little is known about Omicron, some slowdown in hiring and demand
for services is likely, based on the experience with Delta, which was
responsible for the slowest economic growth pace in more than a year
last quarter.
"No company wants to hire more labor if there isn't going to be a demand
for that labor," said David Wagner, portfolio manager at Aptus Capital
Advisors in Cincinnati, Ohio.
For now, the stars are perfectly aligned for November's employment
report. First-time applications for unemployment benefits were near
their pre-pandemic levels in mid-November. The ADP National Employment
report on Wednesday showed strong private payrolls growth last month.
A measure of manufacturing employment hit a seven-month high, a survey
from the Institute for Supply Management showed.
The Conference Board's labor market differential - derived from data on
consumers' views on whether jobs are plentiful or hard to get - jumped
to a record high in November.
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A restaurant advertising jobs looks to attract workers in Oceanside,
California, U.S., May 10, 2021. REUTERS/Mike Blake/File Photo
ELEVATED WAGE PRESSURES
The anticipated drop in the unemployment rate to 4.5% from 4.6% in October would
leave the jobless rate down 1.8 percentage points from January. There were 10.4
million job openings at the end of September.
With the labor market tightening, companies are boosting wages. Average hourly
earnings are forecast rising 0.4%, matching October's gain. That would lift the
annual increase in wages to 5.0% from 4.9% in October.
But the higher wages are not luring millions of Americans who lost their jobs
during the pandemic recession back into the labor force. About 3 million people
remain outside the workforce also despite generous federal government-funded
unemployment benefits ending in September and schools reopening for in-person
learning.
Economists say a strong stock market and rising house prices have increased
wealth for many Americans, encouraging early retirements. Households have also
accumulated massive savings and there has been a surge in self-employment.
"An unwinding of the forces keeping workers out of the labor force will not
occur overnight, and with a sizable chunk of exits concentrated among retirees,
the jobs market is set to remain tight," said Sarah House, a senior economist at
Wells Fargo in Charlotte, North Carolina. "Wage pressures are likely to remain
elevated and full employment is nearer in sight."
Employment gains in November were likely led by leisure and hospitality
businesses, following a pattern similar to October. Manufacturing likely added
45,000 jobs compared to 60,000 in October, probably held back by a since-ended
strike at John Deere, involving about 10,000 workers.
A rebound in government payrolls is expected after three straight monthly
declines. Pandemic-related staffing fluctuations have distorted normal seasonal
patterns at state and local government education. There have been shortages of
bus drivers and other support staff.
"Governments generally cannot easily raise wages or offer hiring bonuses to
compete with private sector employers," said Dean Baker, senior economist at the
Center for Economic and Policy Research in Washington. "Over time, they can
arrange for needed pay increases, which may lead to a reversal in job loss in
November."
(Reporting by Lucia Mutikani; Editing by Dan Burns and Andrea Ricci)
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