Strong US job growth seen in November as strikes end; trend slowing
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[December 08, 2023] By
Lucia Mutikani
WASHINGTON (Reuters) - U.S. job growth likely picked up in November as
thousands of automobile workers and actors returned after strikes, but
the underlying trend will probably point to a cooling labor market.
The Labor Department's closely watched employment report on Friday,
which is also expected to show wages increasing moderately and the
unemployment rate unchanged at nearly a two-year high of 3.9%, will
cement views that the Federal Reserve is done raising interest rates
this cycle.
But with employment gains forecast to remain well above the 100,000 jobs
per month needed to keep up with growth in the working age population,
it could pour cold water on financial market expectations of the U.S.
central bank pivoting to cutting rates as soon as the first quarter of
2024.
The Fed is expected to keep rates unchanged next Wednesday. It has
raised its policy rate by 525 basis points to the current 5.25%-5.50%
range, since March 2022.
"We're looking for more evidence that restrictive monetary policy and
tight credit conditions are having the desired effect, dampening
inflationary pressures, not only in the economy more broadly, but also
the labor market," said James Knightley, chief international economist
at ING in New York.
"I don't think the Fed will be signaling a desire to cut on the scale
that the market is looking to price right now, but they will be pretty
happy with the evidence of the cooling jobs market."
Nonfarm payrolls likely increased by 180,000 jobs last month after
rising 150,000 in October, according to a Reuters survey of economists.
About 25,300 members of the United Auto Workers (UAW) union ended their
strikes against Detroit's "Big Three" car makers on Oct. 31, which
depressed manufacturing payrolls that month, government data showed.
At least 5,000 UAW members remain on strike, the majority of them at
Mack Trucks. Payrolls also likely got a lift from 16,000 members of the
SAG-AFTRA actors union going back to work.
Still, employment gains would be less than the monthly average of
238,800 jobs this year. Demand for workers is moderating as the hefty
rate hikes from the Fed curb demand in the broader economy. The
government reported this week that there were 1.34 job openings for
every unemployed person in October, the lowest since August 2021.
There has also been anecdotal evidence of slowing hiring, with the Fed's
Beige Book report last week describing demand for labor as having
"continued to ease" and "most districts reported flat to modest
increases in overall employment" from early October through
mid-November.
Temporary help, a harbinger of future hiring, has declined for much of
this year. The average workweek has also dropped from 34.6 hours in
January to 34.3 hours in October. It is expected to have been unchanged
at that level in November.
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A worker moves products during Cyber Monday at the Amazon's
fulfillment center in Robbinsville, New Jersey, U.S., November 27,
2023. REUTERS/Mike Segar/File Photo
RISING LABOR POOL
But not every economist agrees that the labor market is softening,
arguing that significant portions of the economy, especially in the
service sector, remain understaffed.
Indeed, an Institute for Supply Management survey this week showed
services industry businesses in November reporting "issues"
backfilling vacancies caused by normal attrition. There were also
comments that "the labor market remains very competitive" and about
"trying to get to full staff levels."
"We're not convinced that the labor market has really slowed
abruptly here," said Dean Maki, chief economist at Point72 Asset
Management in Stamford, Connecticut. "The underlying trend in job
growth remains pretty healthy."
The unemployment rate has risen from a 53-year low of 3.4% in April.
The increase, however, has been driven by a rise in labor supply
rather than companies laying off workers. Economists said there was
a risk that the jobless rate could hit 4.0% in November, but urged
against interpreting the rise as a sign of deteriorating labor
market conditions.
"More people are coming into the labor force, and they're counted as
unemployed when they come in," said Dan North, senior economist at
Allianz Trade North America. "It's not companies firing people. So,
it's not the usual dynamic that would make one concerned."
The expanding labor pool is slowing wage growth, boosting the Fed's
efforts to lower inflation to its 2% target.
Average hourly earnings are forecast climbing 0.3% after gaining
0.2% in October. That would lower the annual increase in wages to
4.0%, which would the smallest advance since June 2021, after rising
4.1% in October.
Moderate wage gains would add to recent data showing inflation
ebbing in October.
While that could contribute to crimping consumer spending this
quarter and beyond, economists do not expect a recession, but rather
a period of tepid growth. Most did not see the economy shedding jobs
until the second quarter of 2024.
"We may have some quarters of virtually flat growth, overall, very
very slow growth for the whole year," said North.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
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