US economy adds 199,000 jobs in November, unemployment rate unexpectedly falls

U.S. job growth continued to chug along at a healthy pace in November, suggesting that the labor market remains resilient even in the face of higher interest rates, stubborn inflation and other economic uncertainties.

Employers added 199,000 jobs in November, the U.S. Department of Labor said in its monthly payroll report released Friday, as striking autoworkers and actors returned to work. That was slightly above the 180,000 jobs forecast by Refinitiv economists.

The unemployment rate unexpectedly fell to 3.7% after rising for three straight months, driven by a sizable drop in the jobless rate for teenagers.

The report also contained modest downward revisions to job growth at the beginning of fall. Gains for September were revised down by a total of 35,000 jobs to 262,000, the government said, suggesting that the labor market is weaker than it previously appeared. October’s gain was unchanged at 150,000 jobs.

WORKERS NOW DEMANDING NEARLY $80K TO START NEW JOB

“Today’s jobs report shows a continued stabilization following the hot summer hiring season, leading to a New Year reset,” said Becky Frankiewicz, chief commercial officer of ManpowerGroup. “We’ve anticipated a stabilization, and we’re moving toward it slowly but surely.”

In another show of strength for the economy, average hourly earnings – a key measure of inflation – increased 0.4% for the month and remained up 4% from the same time one year ago. The monthly increase came in slightly ahead of the 0.3% estimate, but the annual figure was in line with expectations.

The Federal Reserve has signaled that it is closely watching the report for evidence that the labor market is finally cooling after more than a year of interest rate hikes. Policymakers voted last month to leave their benchmark rate unchanged for a second straight time to assess the cumulative impact of previous increases. 

FED LEAVES INTEREST RATES UNCHANGED DESPITE STILL-HIGH INFLATION

Many economists believe that the Fed is done with its tightening campaign, although Chair Jerome Powell warned last week that it would be “premature” to assume that there will be no more rate hikes – and to speculate on when policy may ease. 

Stocks fell after the stronger-than-expected jobs report, with futures tied to the Dow Jones Industrial Average dropping 0.4%.

The Fed will hold its final two-day meeting of the year next week, and investors are closely watching for clues about what comes next for monetary policy amid signs that inflation is continuing to cool. Pricing suggests that the central bank will cut interest rates as soon as March, according to the CME Group’s FedWatch tool, which tracks trading.

“To the extent that the market was expecting four (or more) rate cuts next year, reports like this one are bound to cast shade on that belief and could lead to disappointment in the short run,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. 

Job gains were mostly concentrated in a handful of sectors last month, with the biggest gains in health care (76,800), government (49,000) and leisure and hospitality (40,000). Hiring in manufacturing also trended upward, reflecting the return of UAW workers who had been on strike against General Motors, Stellantis and Ford. 

Employment declined in retail trade, reflecting declines in department stores as well as furniture, home furnishings and electronics retailers. 

The labor market has remained historically tight over the past year, defying economists’ expectations for a slowdown. But there are some signs that cracks are beginning to appear after last year’s blistering pace of growth. 

“Sorting through the noise, the picture that is emerging is one of a resilient but cooler labor market,” said Lydia Boussour, EY senior economist. “Job gains have become less broad-based, labor demand continues to fall, and jobless claims are creeping higher in a sign of softer conditions.”