November Jobs ReportU.S. Employers Added 263,000 Jobs in November

Monthly change in jobs

+263,000

in November

+600,000 jobs

+400,000

+200,000

Nov.

’21

Feb.

’22

May

Aug.

Nov.

+600,000 jobs

+263,000

in November

+400,000

+200,000

Nov. ’21

Feb. ’22

May

Aug.

Nov.

America’s jobs engine kept churning in November, the Labor Department reported Friday, a show of continued demand for workers despite the Federal Reserve’s push to curb inflation by tamping down hiring.

Employers created 263,000 jobs, even as a wave of layoffs in the tech industry made headlines. That was only a slight drop from the revised figure of 284,000 for October.

The unemployment rate was steady at 3.7 percent, while wages have risen 5.1 percent over the year, more than expected.

The labor market has been surprisingly resilient in the face of successive interest rate increases by the Fed, adding an average of 323,000 jobs for the last six months.

But economists found reasons for concern in the evidence that growth is now largely coming from service sectors like education, health care and hospitality, which powered November’s job gains. Hiring in industries most sensitive to rising borrowing costs, like construction and manufacturing, started to level off, and workers put in fewer hours during the average week.

“I don’t want to paint this as a weak report by any stretch, because it’s not,” said Drew Matus, chief market strategist at MetLife Investment Management. “But I do think there are parts of it that just don’t ring like something that’s repeatable month in and month out.”

Hotels and restaurants continue to regain their losses, though the leisure and hospitality industry remains 5.8 percent — nearly a million jobs — below its prepandemic level. Retailing was among the few industries to lose jobs, as employers like Walmart announced lower than usual holiday hiring, although the volatility of the last few years have made that data more difficult to accurately assess.

Businesses, while treading cautiously, have generally still found reason to expand.

“It feels to me like we’re not in a decline, just in a consolidation, kind of a flattening,” said Jon Guidi, the chief executive of HealthCare Recruiters International. “I don’t get a strong negative indication on anything. It’s ‘Hey, Jon, we still need to hire, but maybe not in as much of a rush as we were a few months ago. Maybe we’ll be a little pickier.’”

Mr. Guidi’s industry, health care, has seen some of the highest job-opening rates in the economy as employers seek to win back workers who bore the brunt of dealing with Covid-19. More broadly, job postings and the share of workers quitting their jobs have been declining from record highs earlier in the year, while initial claims for unemployment insurance have remained low.

Transportation and warehousing is one sector where hiring has stalled, losing about 15,000 jobs in November, as pandemic-era shopping binges have given way to more spending on travel and leisure. Some independent truck drivers have left for other occupations, said Bob Costello, chief economist of the American Trucking Associations, but the overall number of jobs has remained significantly above its 2019 baseline.

“If you’re a good driver, you don’t have a slew of accidents on your record and you can pass a drug test, there’s no reason for you to be unemployed unless you want to be,” Mr. Costello said. “Zero.”

Other indicators have signaled that a more serious contraction is underway.

The purchasing managers’ index for manufacturing, which measures how many manufacturers are expanding, turned negative for the first time since the pandemic. And the outplacement firm Challenger, Gray & Christmas measured a quadrupling of layoffs last month from a year earlier, led by 53,000 pink slips at technology companies, the highest Challenger has measured since beginning to collect the data in 2000.

Those recent high-profile cuts may not spread throughout the rest of the economy. But they are likely to cause pain in some regions that depend on those highly paid positions, like San Francisco.

“I think it’s a little premature to see downturns in other industries; tourism is still doing OK,” said Ted Egan, the chief economist for the City of San Francisco, noting that two-thirds of the city’s growth since 2010 has come directly or indirectly from tech. “But I think eventually we will see tech drag down the local economy.”

Employers in November still hired workers at a healthy clip in a broad range of industries despite rising interest rates. Some sectors showed signs of slowing but others remained surprisingly robust. The continued shift from goods to services was apparent.

Leisure and hospitality added 88,000 jobs, slightly above its average of 82,000 jobs added per month over the rest of 2022. But the sector is still 5.8 percent below its prepandemic level, as employers continue to struggle finding enough workers to fill open positions. The job openings rate was 9 percent in October, the highest of any broad industry group.

Health care added 45,000 workers in November, roughly in line with the average number it has added per month this year. The job openings rate in health care and social assistance has been stubbornly high for months.

Construction businesses added 20,000 jobs, more than last month despite soaring mortgage rates. Economists have been anticipating a slowdown in the sector but so far, it has held up.

Information gained 19,000 jobs, even as layoffs at technology companies such as Twitter and Meta, the parent of Facebook and Instagram, have grabbed headlines in recent weeks. Although telecommunications businesses lost jobs, every other industry group in the broader sector added jobs last month. The takeaway: Layoffs in tech are not showing up meaningfully just yet.

Manufacturing employers continued to hire workers, but they may be showing signs of slowing amid the shift away from goods to services. The sector added 14,000 jobs in November, fewer than the 36,000 it added the previous month and fewer than the average number of jobs added per month so far this year and in 2021.

Transportation and warehousing businesses lost 15,000 jobs — among the steeper declines last month — consistent with the broader shift from goods to services. Within that, warehousing and storage lost 13,000 jobs, and couriers and messengers lost 12,000. The sector has lost 38,000 jobs since July.

Retail trade showed a sharp decline in jobs. The sector lost 30,000 jobs last month, driven by declines in general merchandise stores, including department stores. (As with all sectors, the figures are adjusted to offset normal seasonal variations.) Employment in the sector has decreased by 62,000 jobs since August. Although there can be some seasonal funkiness in the sector around this time of year, the pattern in recent months suggests a more consistent slowdown.

Federal Reserve officials are keenly focused on the health of hiring and wages as they try to figure out what might come next for inflation and monetary policy. On Friday, they received further evidence that a meaningful job market slowdown remains elusive.

Central bankers care about the labor market because it could be a key factor in determining how much and how quickly inflation will fade. While other sources of inflation — including supply chain issues and rapidly rising rents — appear poised to dissipate in 2023, an imbalance between job openings and available workers persists.

That could keep wages rising as companies compete for a limited supply of workers, which could in turn push prices up in labor-intensive service industries as companies try to cover their climbing payroll bills. Jerome H. Powell, the Fed chair, highlighted service industry inflation and its links to the labor market in a closely watched speech earlier this week.

“This may be the most important category for understanding the future evolution of core inflation,” Mr. Powell said of the set of services that covers things including health care, haircuts and hospitality. “Because wages make up the largest cost in delivering these services, the labor market holds the key to understanding inflation in this category.”

Friday’s jobs report suggested that hiring in service industries remained solid, and that wages continued to climb at a rapid pace: jumping by 5.1 percent over the past year, far more than economists expected. Wages in service industries picked up by 5.3 percent on an annual basis, much more than the 2.5 percent that was common in the decade leading up to the pandemic.

Job gains also remained solid, with employment climbing by 263,000 in November, much faster than the level that the Fed thinks is necessary to keep the economy steady.

“Job growth remains far in excess of the pace needed to accommodate population growth over time — about 100,000 per month by many estimates,” Mr. Powell said this week, noting that the labor market “shows only tentative signs of rebalancing.”

WASHINGTON — President Biden is overseeing the sort of labor market that, by most measures, any White House would celebrate. Unemployment remains near a half-century low, the Labor Department reported on Friday. As it recovers steep pandemic losses, the economy has already added more jobs through November than in any other year on record, except for 2021, Mr. Biden’s first in office.

The president cheered those numbers on Friday: “We continue to create jobs — lots of jobs,” he told reporters before signing a bill to avert a nationwide rail strike. “We’re in a situation where things are moving — moving in the right direction.”

But for the Federal Reserve, the report offered little to celebrate. Officials have been waiting for hiring and wage growth to slow, paving the way for a more balanced economy where inflation, which is running near a 40-year high, can return to normal. Instead, both have remained resiliently strong even as the early effects of the Fed’s rapid 2022 interest rate increases begin to play out.

“In the labor market, demand for workers far exceeds the supply of available workers,” Jerome H. Powell, the Fed chair, said during a speech this week. Officials are looking for “the restoration of balance between supply and demand in the labor market.”

That divide — between whether strong job gains should be seen as good news for workers or bad news for inflation — underscores the unique challenges that lie ahead for the economy and the White House next year.

The president has consistently preached cautious optimism about the economy, even as inflation has stubbornly defied his administration’s predictions that it would soon moderate. “We are seeing initial signs that we are making progress in tackling inflation, even as we make the transition to more steady, stable economic growth,” Mr. Biden said in a news release on Thursday, before the jobs numbers were released. “That’s good news for the American people, and further evidence that my economic plan is working.”

The jobs report in some ways supported his sunny take. Employers added 263,000 jobs in November, continuing to provide the backbone of administration claims that the recovery is on track. In a background call with reporters on Thursday, administration economic officials emphasized that recent data, including consumer spending figures and current measures of quarterly growth, continue to show the U.S. economy holding up far better than comparable wealthy nations around the world.

Administration aides have also expressed a rising confidence that still-high inflation could, finally, be trending toward historically normal levels.

Yet the same resilience that is giving the Biden administration positive talking points today could create trouble later on if it makes it harder for the Fed to stamp out rapid inflation.

Consumer Price Index data show that inflation has begun to moderate, but it remains far faster than the Fed’s goal: It was running at 7.7 percent in October compared with a year earlier, much more than the roughly 2 percent annual gains that used to be the norm.

Fed officials do see hopeful signs that inflation will cool next year. Supply chain problems are easing and market-based rent prices are no longer jumping, and both of those changes should provide some relief. But with the labor market so strong and wages climbing quickly, central bankers have also warned that it will be difficult for price increases to fall back to normal levels.

The labor market “shows only tentative signs of rebalancing, and wage growth remains well above levels that would be consistent with 2 percent inflation over time,” Mr. Powell said this week.

That is what makes Friday’s report an awkward one for the central bank. It provided welcome news that the labor market is resilient, on one hand, but it also showed that companies are hiring at more than 2.5 times the pace the Fed thinks is necessary to accommodate population growth. Wage growth re-accelerated on a monthly basis, climbing a hefty 5.1 percent compared with the prior year.

Investors read the report as a sign that the Fed will need to keep raising rates into 2023. That could make it harder to achieve a so-called “soft landing,” where inflation slows but the economy avoids recession — an outcome that both Mr. Biden and Mr. Powell say they would like to see.

“To the extent that Chair Powell put some air into the soft landing narrative this week, this report undoes that to some degree,” said Neil Dutta, head of U.S. economics at Renaissance Macro Research.

Mr. Dutta said that if the economy remains strong, that could prod Fed policymakers to work harder to slow consumer and business demand. That would increase the chances that the economy gets painfully squeezed down the road, sending unemployment higher.

Mr. Biden seemed to brush off those fears on Friday, noting that in recent months, wage gains have outpaced inflation: “Wages for working families, in fact, over the last couple months have gone up. Up,” he said. “These wage increases are larger than the increase in inflation over the same period of time.”

But Fed officials have struck a firmer tone, making it clear that pay gains will need to come down in order for them to be confident that inflation is under control.

“Strong wage growth is a good thing,” Mr. Powell said this week. “But for wage growth to be sustainable, it needs to be consistent with 2 percent inflation.”

The labor market could still slow next year, helping to weigh on inflation just as price increases on goods moderate and rent growth begins to cool — after all, the Fed has raised rates significantly already, and those moves are only now trickling through to temper economic growth.

While job gains and wages were both well above economists’ expectations, some analysts pointed out that they have been slowing over the course of 2022. Republicans seized on the data point as “Biden’s worst jobs report of the year.”

“The number was better than expected, but when you look at the broader picture in the U.S. labor market, demand for workers is slowing,” said Blerina Uruci, an economist at T. Rowe Price.

Central bankers have signaled that they will slow their pace of rate increases this month, which should give them more time to gauge how much more they need to do to restrain the economy. But many economists and investors on Wall Street expect that won’t be enough to save the economy from a Fed-induced recession.

Bank of America economists wrote this week that they foresee a downturn, flowing from “the headwinds of a weaker labor market, higher borrowing costs, tighter credit standards and weaker balance sheets.”

If the job market continues to sprint rather than slowing to a jog, the recession scenario looms more likely — a possibility White House officials largely dismiss, but one that Fed officials have acknowledged.

“I do continue to believe that there’s a path to a soft or softish landing,” Mr. Powell said this week. “To the extent we need to keep rates higher longer, that’s going to narrow the path to a soft landing.”

Share of people who are in the labor force (employed, unemployed but looking for work or on temporary layoff)

63%

62

62.1%

61

2019

2020

2021

2022

63%

62

62.1%

61

2019

2020

2021

2022

By most measures, the labor market has returned to full strength, except in one important regard: The percentage of the population who want or are able to work.

The overall labor force participation rate ticked down in November, to 62.1 percent. In February 2020, it stood at 63.4 percent. Some of that is because older workers are retiring early, but the share of people in their prime of their careers — 25 to 54 years old — fell to 82.4 percent, 0.6 percentage points below its prepandemic level.

Even more concerning, the majority of people leaving the labor force were those who had jobs, suggesting that they departed by choice. “It might be because it’s early retirement or inflation, their wages were not enough for them to keep working,” said Tuan Nguyen, an economist at the consulting firm RSM US. “So that’s troubling for the Federal Reserve, because we never want to see a decline in labor supply.”

The incomplete recovery in labor force participation is puzzling, since nominal wages have been rising at the fastest pace in decades, which normally makes taking a job more worthwhile for people who otherwise might spend their time in other ways. It also creates a chicken-and-egg situation for the Federal Reserve: As people stay on the sidelines, that pushes wages higher, making it more difficult to take inflation.

There are some theories as to why participation remains depressed, including a shortfall in employees of day care services for children, which makes it more difficult and expensive for parents to go to work themselves.

Although prime-aged women have rebounded more quickly than men, they saw a larger drop in November, down 0.2 percentage points, to 76.3 percent.

Although the average workweek shrank slightly, the number of workers getting part-time hours when they’d rather be full time remained steady, near the lowest it’s been since the early 2000s. That indicates that employers are trying to maximize the workers they have been able to hire.

Over time, racial gaps in labor force participation have been shifting. Black people of all ages are now working or looking for work at a higher rate than white people, while Hispanic and Asian people have remained substantially ahead.

Wage growth was stronger than economists expected in November, fresh data showed, as the Federal Reserve parses pay gains for signs of where inflation is headed and as workers struggle to keep pace with rising costs.

Average hourly earnings climbed by 5.1 percent from the year before, Bureau of Labor Statistics data showed. That was more than the 4.6 percent economists in a Bloomberg survey had forecast. Wages had climbed 4.9 percent in the year through October.

On a monthly basis, wages climbed 0.6 percent, the strongest pace since January. The picture that emerged from the data was one of job market in which employers are competing for workers and paying more to get them.

Even as pay climbs swiftly, many workers are failing to keep pace with rapid inflation. Consumer Price Index inflation stood at 7.7 percent in the year through October. Nevertheless, pay gains are rapid enough that officials at the Fed worry that they would make it difficult for inflation to return to a more typical 2 percent pace if they persist.

Wages continue to increase, though still not at the pace of inflation

Year-over-year percentage change in earnings vs. inflation

CONSUMER

PRICE INDEX

+7.7%

in October

+8%

+6

AVG. HOURLY

EARNINGS

+5.1%

in Nov.

+4

+2

2019

2020

2021

2022

CONSUMER

PRICE INDEX

+7.7%

in October

+8%

+6

AVG. HOURLY

EARNINGS

+5.1%

in Nov.

+4

+2

2019

2020

2021

2022

That’s partly because companies that are paying higher wages — particularly in service industries, where labor is a major cost of doing business — are likely to charge customers more to protect their profits. Jerome H. Powell, the Fed chair, highlighted wage gains as something the central bank is watching closely during a speech this week.

“Wage growth remains well above levels that would be consistent with 2 percent inflation over time,” Mr. Powell said repeatedly during his remarks, delivered at the Brookings Institution. “Despite some promising developments, we have a long way to go in restoring price stability.”

While workers could be forced to curb spending after many months in which their paychecks have fallen behind price gains, which could help demand to cool and force companies to lower prices to compete for shoppers, that moderation has been patchy. Consumption re-accelerated in October, data this week showed.

Many families have substantial savings amassed during the pandemic, which they are steadily spending. Households paid down debt during the pandemic, so they have capacity to use credit to sustain consumption. And the U.S. economy has been adding jobs rapidly, which — paired with solid wage gains — has helped to keep overall income rising faster than prices.

“To be clear, strong wage growth is a good thing,” Mr. Powell said this week. “But for wage growth to be sustainable, it needs to be consistent with 2 percent inflation.”

Stock trading was turbulent on Friday after U.S. employment data for November showed more jobs were added than economists expected, causing markets to fall quickly before recovering some losses as investors grappled with what the report might mean for the economy.

The S&P 500 index ended the day with a drop of just 0.1 percent, after recouping losses of more than 1 percent early in the day. The Nasdaq composite fell about 0.2 percent.

The jobs report is critical to Wall Street’s outlook on the economy, particularly its understanding of how far the Federal Reserve has left to go in its campaign of interest rate increases as it looks to bring down inflation. Rising interest rates are a problem for stock investors, because they can dampen spending, economic growth and corporate profits.

While some data, like October’s Consumer Price Index report, have suggested the Fed has made progress in taming inflation, the labor market remains robust.

The S&P 500 has been climbing steadily in recent weeks, recovering from a staggering loss earlier this year, as investors expect a slowdown by the Fed. The benchmark index gained more than 5 percent in November and about 8 percent in October, the first back-to-back monthly gains since mid-2021 and one of the strongest on record according to analysts at Bank of America.

Friday’s report, which also showed that wages rose more than economists expect, prompted a pullback because it suggests the Fed will have to keep interest rates high for longer, said Rick Pitcairn, the chief investment officer of Pitcairn, an investment manager. “The Fed’s going to have to keep its foot on the brake of the economy for longer, which is bad for risk markets.”

Government bond yields, which have fallen in recent weeks, also reacted to Friday’s report. The yield on the U.S. two-year Treasury note, which is tied to expectations around the Fed’s interest rate movements, rose slightly to around 4.3 percent and the yield on the 10-year note stood at about 3.5 percent.

Employers added 263,000 jobs in November compared with economists’ expectations for 200,000 new jobs. Friday’s report showed wages in service industries rose by 5.3 percent on an annual basis in November, compared with the 2.5 percent pace that was common before the pandemic.

On Wednesday, the latest Job Openings and Labor Turnover Survey showed that job openings remained high in October, even as the number of open positions fell during the month. Crucially, the number of layoffs during the month was unchanged.

Addressing the labor market at an event on Wednesday, Jerome H. Powell, the Fed chair, said there were “only tentative signs” that the labor market was moderating and wage growth remained rapid.

“Despite some promising developments, we have a long way to go in restoring price stability,” Mr. Powell said.

Mr. Powell also said a slowdown in the pace of the Fed’s interest rate increases might be possible at its meeting this month.

Oil prices slipped after diplomats from the European Union agreed on Friday to set a top price of $60 per barrel for Russian oil, and just before the Organization of Petroleum Exporting Countries and Russia, collectively known as OPEC Plus, will meet on Sunday to consider production levels.

The price of West Texas Intermediate crude oil fell 1.3 percent to about $80 a barrel. The price of Brent crude oil, the global benchmark, fell 1.2 percent to about $85 a barrel.

The U.S. dollar was relatively unchanged against a basket of major currencies on Friday but remains up more than 9 percent since the beginning of the year.