Despite the ongoing, and arguably worsening, strain from the US labor market’s “Great Resignation,” more than 100,000 job losses were announced in October and November alone. Although alarm bells may not have rung in the markets, by October, the economy had already shed 162,000 federal jobs. November was no better, ushering in another 6,000 jobs lost. Consequently, the unemployment rate jumped to 4.6% in November, up from 4.4% in September. Such a trend would suggest the labor market is still, on net, growing weaker by the day. Consequently, economists are anticipating that the Fed will take even more easing actions.
The October payrolls were down 105,000 at a time when we need to see positive job growth. Yet, in November, we saw a payroll increase of just 64,000 – barely keeping pace with the working-age demographic. Though this is a small step in the right direction, this overall trend continues to be alarming. In November, it was the construction and healthcare sectors that propelled hiring to the roof. Yet, manufacturing payrolls have reached their lowest levels since March 2022.
The labor market continued a trend of slight increases in participation rates. This means that more people are looking for jobs. Overall, the long-term outlook is concerning as most industries point to declining ability to stay consistently staffed. Hourly earnings growth has started to cool, adding to the mixed signals in the current economic picture.
Analysts have been forecasting for months that moderate headline inflation was here to stay. As the Federal Reserve assesses these labor market developments, expectations have emerged for another 75 basis points of gradual easing over the coming year. A pause in rate changes is expected in January.
“Still, the government also fundamentally lost workers.” – Rogier Quaedvlieg, Senior Economist at ABN AMRO
The new and still evolving data describes a pretty difficult and tangled picture of the current labor market. One analyst remarked, “We should note that all of this data is even more noisy than usual.” This unpredictability further complicates life for policymakers trying to craft the best possible responses.
The new data suggests a continuously weakening labor market, raising concerns among economists about future employment prospects and economic growth.