U.S. wages grow stronger as the pace of hiring declines
Jobs report indicates further slack in the U.S. labor market
The latest jobs report from the United States showed that while the pace of hiring slowed in November, wage growth increased to the highest level in a decade as the unemployment rate held steady. The data underlined the fact that the unemployment rate remains active in supporting economic growth.
Data released by the U.S. labor department showed that payrolls grew at a seasonally adjusted pace of 155,000 in November. This was slightly below the consensus of an increase of 198,000 during the month.
The U.S. unemployment rate was seen steady at 3.7% which has been at the lowest unemployment rate in over four decades. The unemployment rate matched the consensus.
Wage growth, on the other hand, grew 3.1% and marked the best pace of increase since 2009.
Previous revisions showed that U.S. employers added 237,000 jobs in October while September was revised to show 119,000 jobs. This resulted in a net downward revision of 12,000 jobs for November. Government payrolls fell 6,000 during November.
The strong surge in the numbers for October was seen offset by the downward revision for September primarily due to Hurricane Florence which impacted hiring.u
The U.S. economy was seen averaging 206,000 jobs a month for the 11 months of the year. This was seen to be higher than last year’s average jobs of 182,000 a month despite the tighter labor market conditions. The increase in November’s payrolls was observed to be the longest stretch of expansion for 98 consecutive months.
Hiring in sectors such as retail, transportation and warehousing and manufacturing sectors increased. However, payrolls in the construction, leisure, and hospitality industries were seen to be slowing.
The weaker pace of hiring for November comes amid mixed signals from the U.S. economy. Equity markets were seen trading lower since early October while bond yields have also declined sparking concerns that a recession might be ahead.
Businesses were seen showing caution, holding back from making significant investments. The concerns come amid global growth rates that are declining. Despite the data, consumer spending which is a substantial component of the U.S. economy was seen to be strong. The gains in wages validated this for November.
The average earnings report was the biggest surprise in the jobs report. Wage growth was seen rising for the second consecutive month and was better compared to a year ago. Wage growth had remained muted for the most of this year and accelerated only in the past few months.
Another measure of unemployment which also accounts for those who are discouraged to look for work and those who are working part-time but prefer full-time jobs rose to 7.6% in November. This was higher compared to the 7.4% increase that was seen in the month before.
The underemployment rate was seen to be at the lowest levels in nearly 18 years. However, it was seen to be slightly higher. The data suggests that there could be still some slack left in the labor market.
The labor force participation rate, however, remained modest touching to the lows last seen in 2015. The participation rate was seen to be holding steady at 62.9%.
Ahead of the jobs report, a separate report showed that more businesses were reporting shortages in the labor market. This was seen to be consistent among all the 12 districts of the Federal Reserve. This came as in summer; the report showed that unfilled jobs hit the highest level.
The jobs report data comes ahead of the Fed’s meeting due in two weeks. The Central Bank is expected to hike interest rates for a fourth time this year by a quarter basis point.