The U.S. Bureau of Labor Statistics (BLS) released a report on Tuesday showing that the non-farm payroll employment in November increased by 64,000, slightly exceeding the Dow Jones’ earlier prediction of 45,000. The unemployment rate rose to 4.6%, higher than expected.
This data was delayed due to the government shutdown.
Looking at specific industries, the healthcare sector once again led employment growth by adding 46,000 jobs in November; the construction industry saw an increase of 28,000 jobs; and social assistance added 18,000 jobs.
However, the transportation and warehousing industry saw a decrease of 18,000 jobs in November, and federal government employment declined by 6,000.
In terms of the closely watched average hourly earnings as a gauge for inflation, the average hourly earnings increased by 0.1% in November to $36.86, representing a 3.5% increase year-over-year.
The BLS also revised the employment data for August and September. The revised data shows a decrease of 26,000 jobs in August and an addition of 108,000 jobs in September, lower than the originally reported 119,000.
Apart from the November report, the BLS also released a simplified version of the October employment data indicating a decrease of 105,000 non-farm payroll jobs. While there is no official estimate, economists on Wall Street generally expected a decline in October after an unexpected increase of 108,000 non-farm payroll jobs in September.
Heather Long, Chief Economist of the Navy Federal Credit Union, stated that “the U.S. economy is experiencing a job recession.”
“In the past six months, the U.S. has only added 100,000 jobs, with most of the new positions concentrated in the healthcare industry. Due to the aging population in the U.S., this industry has been consistently hiring,” Long said.
From a policy perspective, the Federal Reserve must navigate the challenging balance of trying to stem further softening of the labor market while preventing worsening inflation.
Employment data is often a crucial reference for the Federal Reserve in deciding on interest rate cuts. In the last meeting of the year, the Federal Reserve cut rates by 25 basis points but hinted at a higher threshold for further cuts. Since September, the Fed has approved three consecutive rate cuts, bringing the federal funds rate target range to 3.5% – 3.75%.
Kay Haigh, Co-Head of Fixed Income and Liquidity Solutions at Goldman Sachs Asset Management, mentioned that given the disrupted data release, the Federal Reserve is unlikely to place too much emphasis on the employment report from Tuesday. The report on December employment data released in early January next year may hold more significance for the Fed in determining its policy direction before the next meeting.
Market sentiment suggests a low probability of another rate cut in January. According to the CME Group’s FedWatch data, following the BLS release of November employment data on Tuesday, the probability of a rate cut in January next year stands at around 24.4%, consistent with the previous day.