U.S. jobless rate steady as hiring expands in November

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Summary:

  • US. unemployment rate steady at 4.1% in November
  • US. economy adds 228k jobs in November, higher than forecasts of 198k
  • October’s payrolls revised to 244k from 261k previously
  • Average hourly earnings rise 0.2% on the month
  • Wage growth rises 2.5% on the year in November, up from 2.4% previously
  • November payrolls makes December rate hike certain

The pace of hiring and the overall labor market in the U.S. continued to be marked by robust hiring and low unemployment. This is one of the best growth periods in the labor market since more than a decade ago.

Data from the U.S. Labour department released last Friday showed that nonfarm payrolls rose 228,000 on a seasonally adjusted basis in the month of November. This marked a record 86th consecutive month of expansion. In October, payrolls were revised to show 244,000 jobs during the month.

U.S. Nonfarm Payrolls: 228k (November, 2017). Source: Tradingeconomics.com
U.S. Nonfarm Payrolls: 228k (November, 2017). Source: Tradingeconomics.com

The steady pace of hiring came as the U.S. unemployment rate remained steady at 4.1% for the past two months. This was also the lowest unemployment rate in the past 17-years.

The lowest unemployment rate recorded in the U.S. was 3.8% in 2000 just before the peak of the tech boom of that era. Previously, the jobless rate was at 3.4% prior to the 1960’s.

Investors cheered the jobs report and took it as another sign of an advancing economy. The Dow Jones closed 0.49% on Friday following the payrolls report.

Earlier in the week, private payrolls processor ADP released the private payrolls data. Private sector hiring was rising to 190k, beating estimates of 189k. October’s private payrolls were unchanged at 235k.

ADP Private Payrolls: 190k (November, 2017). Source: ADP
ADP Private Payrolls: 190k (November, 2017). Source: ADP

The private payrolls data showed that the services sector continued to remain at the forefront. Most of the job gains came from the medium and small businesses. Ahu Yildirmaz, vice president of ADP said, “The labor market continues to grow at a solid pace. Notably, manufacturing added the most jobs the industry has seen all year. As the labor market continues to tighten and wages increase it will become increasingly difficult for employers to attract and retain skilled talent”

Wages continue to remain a concern

Despite the robust hiring and low unemployment rate, wage growth continued to be a concern. Friday’s data showed that the average hourly earnings in the private sector increased just five cents compared to the previous year. Wages grew 2.5% on the year, slightly higher from October’s 2.4% increase. It was however lower than the estimates of a 2.7% increase.

Despite the weakness in the wage data, officials are hopeful that the tightening labor market will eventually see wages breaking through. The low jobless rate is expected to eventually make it into a worker’s market that could start demanding higher wages.

U.S. Growth expected to continue

The labor market data, coupled with other economic indicators suggest that the U.S. growth is on track to average a 3% annualized GDP growth rate. Since 2004, the U.S. economy was seen struggling to deliver at above 3% GDP growth rate.

The labor market data showed that despite the hurricanes in August and September, job growth remained solid. Business investment has been accelerating, which has also helped to push the equity markets to record highs. The trend in the growth was consistent with other major economies such as the Eurozone and even Japan, which has been enjoying a sustained expansion for nearly 16 years.

The current state of the global economy has made economists become more optimistic, with many noting that growth in 2018 is likely to be the best since the 2008 global financial crisis.

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