WASHINGTON - The United States economy continued to generate robust job growth in November, suggesting there is still juice left in a labour market that has been slowing almost imperceptibly since the pandemic rebound in 2022.
Employers added 199,000 jobs in November, the Labour Department reported on Dec 8, while the unemployment rate dropped to 3.7 per cent. The rise in employment includes about 41,000 auto workers and actors who returned to their jobs after strikes, and others in related businesses that had been stalled by the walkouts.
The number is the latest sign that the US economy remains far from recession territory, despite 1½ years of interest rate rises that have weighed on consumer spending and business investment.
Most analysts have been surprised by the durability of the recovery, which owes a lot to the cash that consumers accumulated over the past few years. That has powered jobs in the services industry even in the face of rising costs, the resumption of mandatory student debt payments and slowing wage growth.
“They haven’t materialised yet, or at least in a meaningful way,” First American Financial Corp deputy chief economist Odeta Kushi said about consumer headwinds. “Our estimates take us through being able to sustain the current rate of spending with that savings cushion through the first quarter of the year, which boosts the demand side of the labour equation.”
The trajectory for most of 2023 has pointed towards exactly the sort of soft landing that the Federal Reserve is seeking with its interest rate policy: A historically high number of job openings has steadily receded, initially without a significant rise in the unemployment rate.
Even as some industries that surged during the pandemic have shed jobs, others that struggled to win workers back during the recovery – such as hotels and restaurants – soaked up labour from contracting businesses, helping to stave off a rise in joblessness.
“If you have a sector like wholesale or retail trade start to shed workers, they can very easily transition into something like leisure and hospitality,” said US economist at RBC Capital Markets Michael Reid. “If those sectors start to see a pullback in spending, we still do see strength in healthcare and social assistance.”
The picture has started to change in recent months, however, with the unemployment rate rising to 3.9 per cent in October as a result of both permanent layoffs and more people entering the labour force in search of work.
The share of people older than 55 who are in the labour force – working or looking for work – fell in 2020 and has not recovered, but the proportion of those aged between 25 and 54 has rebounded. It has become increasingly apparent that women in that age bracket, who achieved a record level of participation in 2023, have benefited from the broader availability of remote work.
That influx of workers – which includes a recovery in immigration flows – has also taken the air out of pay rises. Combined with a surge in productivity, that means current levels of pay growth may be consistent with the Fed’s inflation goal of 2 per cent annually. The annual inflation rate has recently fallen to 3 per cent, less than half of what it was when the Fed’s interest rate increases began.
Despite the stronger-for-longer performance of the labour market thus far, most forecasters expect a continued decline in job growth in early 2024 as consumers run through their savings, reducing spending, and the remaining pockets of labour shortage fill up. NYTIMES
