The amazing labor market that just keeps plugging along despite the high interest rates.
By Wolf Richter for WOLF STREET.
It was the kind of jobs report that you’d expect from an economy that is plugging along just fine, growing at a solid pace while the gyrations of the pandemic have settled down.
There was a kink in it though: Average hourly earnings jumped, with growth accelerating for the third month in a row, rising at an annualized rate of 5.0% in November, at the high end of the range of the past 12 months, and we discussed that a minute ago
The question is why would the Fed “pivot” to multiple rate cuts starting in Q1, with the labor market this strong, with wage growth re-accelerating, and with inflation in services – where two-thirds of consumer spending goes – running at 4.6% according to the PCE price index and at 5.5% according to CPI? Sure, energy prices plunged, and durable goods prices dropped off their spike, but the action is in services, and Powell has lamented the stubborn core services inflation at every press conference.
So this was not a rate-cut jobs report – and there hasn’t been a rate-cut jobs report this year. This was another jobs report in a long series that changes the question of when the Fed would cut rates to why it would.
Employers added 199,000 workers to their payrolls in November, according to the survey of employers by the Bureau of Labor Statistics today.
The strikes in the manufacturing sector had caused manufacturing employment to fall by 35,000 in October, but by now, many of these workers went back to work – as we said a month ago they would, and here too. So in November, employment in manufacturing rose by 28,000 workers.
The three-month average of jobs created by employers rose to 204,000 and has been in the same range since June. In 2019, the three month-average of net job gains was running between 100,000 and 200,000.
Total payrolls at employers rose to a record of 157.1 million.
The total number of workers, including self-employed, jumped by 747,000 in November from October, to a record 162.0 million, based on the BLS survey of households, which accounts for all types of workers, even those that do not work for an employer per se (green line in the chart below).
To iron out these month-to-month ups and downs and see the trend, we look at the three-month moving average. It rose by 162,000 in November (red line).
The number of workers includes these categories that we’ll get into in greater detail:
Workers with wages and salaries
Self-employed workers
Part-time workers
Multiple jobholders – in this survey of households, each worker counts as one worker, no matter how many jobs they have, since this data counts people not jobs.
The number of workers with salaries and wages jumped by 644,000 in November, to 150.8 million, per the survey of households.
The number of self-employed workers rose by 55,000 in November after having dropped by 43,000 in October.
A larger population and a larger labor force and more working people means that self-employment should be looked at in relationship to the total number of workers – what portion of the workers are self-employed.
Self-employment as a percentage of total employment has dropped to the low end of the range before the pandemic, to just over 5.5%:
The number of part-time workers rose by 339,000 in November after plunging by 670,000 in October. At 27.0 million, the number of part-time workers was roughly in line or below the years before the pandemic (between 27-28 million). The BLS defines part-time work as 34 hours per week or less.
Part-timers as a percent of total employment dipped to 16.7%, roughly in the middle of the range of the past two years, and well below the declining range before the pandemic. In 2016, it was still above 18%:
The number of multiple jobholders dipped in November to 8.34 million. As percent of all workers, multiple job holders dipped to 5.1%, same as where they’d been in November 2019. In the 1990s, multiple job holders accounted for over 6% of total employment.
Note that in this survey of households, each worker counts as one worker, no matter how many jobs they have, since this data counts people not jobs:
The labor force jumped by 532,000 people. These are people who are either working or actively looking for work. Over the past 12 months, the labor force grew by 3.73 million. The labor force is surging due to the increase in the number of workers and the influx of people looking for work, such as young people just starting out, immigrants, people returning to the labor force after some time off the hamster wheel, etc.
During the pandemic, the constrained labor force had been a huge problem and caused some of the labor shortages and the sharp increases in wages.
But the increase in the labor force in November has been more than absorbed by demand for labor, and the number of unemployed and the unemployment rate actually dipped.
The fact that supply of labor rose at a good clip and demand for labor rose even faster is another indication of a still strong labor market.
The number of unemployed people who are actively looking for a job fell by 215,000 to 6.29 million, the lowest since July, after having zigzagged higher from historic lows (green line). The three-month moving average dipped to 6.39 million (red line).
The unemployment rate, which accounts for the rising labor force, dipped to 3.7%, the lowest since July. These are historically low rates. The rate has hovered in the range between 3.4% and 3.9% since February 2022.
Just to see how historically low the unemployment rate is, here are the past four decades:
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The post The Question is Not “When” but “Why” the Fed Would Cut Rates with a Labor Market this Strong and Wage Growth Accelerating appeared first on Energy News Beat.
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