US adds 263K jobs in November, causing inflation woes

The U.S. economy added 263,000 jobs in November, boosting a labor market that has proven surprisingly resilient, while the Federal Reserve’s primary task has been complicated by tackling inflation, which remains the nation’s biggest economic threat. . .

The optimistic reading from the Bureau of Labor Statistics, released on Friday, was slightly lower than in October, but still exceeded historical norms and analysts’ expectations. The unemployment rate was unchanged at 3.7%.

Economists say they are encouraged by the resilience of the labor market, but worry that continued momentum, and rising wages in particular, will force the Fed to raise interest rates more aggressively in its bid to slow the economy longer, causing the risk of a recession.

“The labor market continues to advance, despite several headwinds,” said Daniel Zhao, senior economist at Glassdoor. “We get some mixed signals from the report, which is not a surprise at a time when the economy is at a turning point, but in retrospect this still points to a labor market that is tougher than we expected. On the other hand, inflation has also been more resilient than we expected.

The Fed has already raised interest rates six times this year, and plans to do so again in December, hoping to slow the economy enough to stop rising prices. Despite these efforts, headline inflation, at 7.7%, has slowed from its summer high of 9.1%. While consumers are accepting the relief so far, there is still a long way to go.

The central bank hopes to bring inflation down to its 2% target without sinking the economy or causing unemployment.

“Obviously, we’re in a time of tremendous risk in the economy right now,” said Adam Ozimek, chief economist at the Economic Innovation Group, a nonpartisan business organization. “A recession cannot be ruled out, but the economy seems to be rebalancing towards sustainable growth.”

Stocks fell on the news, falling sharply as trading opened before recovering around midday. All three major indexes were down for most of Friday, although the Dow Jones Industrial Average reversed course late in the day.

The labor market, which is still strong, remains one of the strongest pillars of an economy that is otherwise devastating. Americans are spending a lot, even though they are saving less than in 15 years. Production activity contracted in November for the first time in more than two years.

However, the Fed remains concerned that a persistently active labor market could lead to higher wages, which could exacerbate inflation. Wage growth, which had moderated in recent months, increased in October and November. Federal Reserve Chairman Jerome H. Powell emphasized this week that as long as inflation remains too high, wage increases for Americans will not translate into a higher standard of living.

“Right now, people’s wages are being eaten away by inflation,” Powell said at an event at the Brookings Institution on Wednesday. “But if you want to have a strong, sustainable labor market, with real wages going up across the wage spectrum, especially for people at the bottom, you have to have price stability. And until we get that back, I can’t go back to that place.”

Median hourly wages rose 0.6% between October and November, the biggest increase in 10 months. Headline wages rose 5.1% from a year earlier, to an hourly average of $32.82, which economists say puts additional pressure on the central bank to stay on its aggressive monetary tightening course. .

“This is another wake-up call that the Fed is not going to stop raising rates anytime soon,” said Megan Greene, chief global economist at the Kroll Institute. “I’m surprised at how strong the job market is, but it can’t last. We’re in a weird economy and the data is all over the place.”

Although hiring has remained brisk, Americans continued to drop from the workforce in November. The proportion of people who were working or looking for work fell in October for the third month in a row. Overall, the labor market was still short 102,000 workers before the pandemic, which economists say is a worrying trend that could continue to push up wages as employers compete for a shrinking pool of employees.

More broadly, the latest jobs numbers show a breakdown in hiring as Americans shift more of their spending from goods to services. Many of the biggest job gains in November were concentrated in service industries, such as leisure and hospitality, health care and construction. Meanwhile, employment in retail, transportation and warehousing fell as companies cut hiring ahead of the holidays.

Some restaurant owners say they are finally having luck finding employees after a short-staffed summer. In Bath, Maine, Mae’s Cafe & Bakery added six new workers (four servers, one busboy and one administrative assistant) in the past month, bringing its total workforce to 28.

“We’ve been operating lean for so long, but we felt like all of a sudden we got lucky and were able to find the people we were looking for,” said Julie Cook, general manager. “But that doesn’t mean it was easy. Our biggest challenge was finding cooks, especially for the weekend.”

Eventually, Cook says she would like to be open six days a week instead of seven, and expand the cafe’s repertoire with food, but not until she can secure more employees.

“Our customers were a bit grumpy because they have to wait or sometimes we only have a limited menu, but when someone gets sick there’s not much you can do,” she said. “We are staffed to the limit.”

A separate government report earlier this week showed there were 10.3 million job openings in October, down from 10.7 million the previous month but still near all-time highs.

“There is a disconnect between workers and jobs,” said Giacomo Santangelo, an economist at Monster.com. “You can say that there are openings for every unemployed person, but that does not correspond to reality. Nursing is in high demand, but if you lose your job at Twitter, Meta or Alphabet, you will not become a nurse.” .”

That divide is becoming increasingly clear as some companies have announced mass layoffs, while many others struggle to find enough workers. Some of the country’s largest employers, including Walmart, Amazon and Google, have recently cut thousands of management positions. Tech companies have endured a particularly sharp slowdown with steep job losses and hiring freezes, and media companies including newspapers CNN and Gannett announced layoffs this week. Meanwhile, employers in low-wage sectors such as education, healthcare and hospitality are reporting widespread labor shortages. (Amazon founder Jeff Bezos owns The Washington Post.)

Roxanne Pauni, the owner of a childcare center in Logan, Utah, says she has hired at least 80 people in the past two years, although she currently has only 25. She has raised her hourly wages from $9 to $15, but she is still struggling to find and keep employees.

“You have a few good workers here and there, but some of them only last one or two paychecks,” he said. “It’s hard to compete when everyone else in the area is trying to rent as well.”