The latest jobs report released Friday showed the U.S. economy adding 199,000 jobs in November, exceeding economist expectations and signaling continued strength in the labor market heading into 2023. The unemployment rate also dropped to 3.7%, the lowest level since 1969.
Hiring Remains Robust Despite Recession Fears
Heading into November, fears of an impending recession led many to brace for significant job losses. However, the latest data shows hiring remains robust across most sectors of the economy.
The November gains indicate employers are still actively looking to fill open positions. Industries like leisure and hospitality, healthcare, and construction saw strong job growth last month.
“The job market is still hotter than expected,” said AnnElizabeth Konkel, economist at the Indeed Hiring Lab. “The uncertainty in the macroeconomic environment has not stopped employers from hiring.”
Sectors seeing job gains in November:
- Leisure and hospitality: +88,000
- Healthcare: +45,000
- Construction: +20,000
- Manufacturing: +14,000
The November report suggests the risk of widespread layoffs remains low for now, though some tech companies like Amazon and Meta have announced hiring freezes and modest job cuts recently.
Unemployment Rate Hits 50-Year Low
Along with stronger-than-expected job additions, the unemployment rate fell to 3.7% in November – the lowest level since 1969.
The declining jobless rate points to historically tight labor market conditions that have persisted over the past year despite high inflation and rising interest rates. There are still nearly two open jobs for every unemployed person searching.
“The U.S. labor market is still hot,” said Julia Pollak, chief economist at ZipRecruiter. “Employer demand for workers remains quite strong.”
Wage growth also accelerated in November, with average hourly earnings rising 0.6% over the month. Higher wages could help attract more people off the sidelines and into the workforce.
“For job seekers, it remains a great time to search for a better job or push for a raise,” Pollak said.
Fed Remains Focused on Slowing Hiring
The stronger-than-expected November jobs numbers will be unwelcome news for the Federal Reserve as it seeks to cool down the labor market and tamp down wage-based inflationary pressures.
The Fed would prefer to see a more pronounced pullback in hiring at this stage of the rate hiking cycle. The central bank has lifted its benchmark interest rate six times this year in an effort to slow the economy.
Most Fed officials expect additional rate hikes will be needed in 2023 to soften labor market conditions and hit their 2% inflation target. November’s data is unlikely to deter further policy tightening.
“Despite mounting economic uncertainties, employers are holding onto their workforces and even expanding modestly,” said Elise Gould, senior economist at the Economic Policy Institute. “The Fed still has more work to do.”
Outlook for 2023 Remains Murky
While the November jobs numbers showed continued momentum in hiring, there are signs emerging of cooling in pockets of the economy.
Job cuts have picked up recently in interest rate-sensitive sectors like housing and tech. And surveys indicate falling confidence among both business leaders and consumers around the economic outlook.
It remains unclear if the U.S. can achieve a soft landing in 2023. Economists say risks remain tilted towards recession, even if widespread job losses don’t materialize immediately.
“The path to a soft landing is narrow,” said economist Diane Swonk. “The lagged impacts of tighter Fed policy on employment are still ahead. Layoffs are poised to pick up.”
Most experts believe job growth will continue slowing in the months ahead. But whether the economy tips into recession likely hinges on the Fed’s ability to tame inflation without spurring significant unemployment.
“The risks are clear, but a soft landing is still possible,” said Economist Claudia Sahm. “The Fed is trying to thread a very tricky needle.”
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