The state of the U.S. labor market has been a concern in recent months. Recent data released by the Department of Labor provided an unequivocal sign that employment is declining and the unemployment rate is rising. The report, which came later than normal, crunched some terrifying new figures. In October—just last month—the economy lost more than 100,000 jobs with the federal government contributing a jaw-dropping loss of 162,000 jobs. Yet this unexpected and painful downturn has economists and policymakers throughout the country worried that we have lost the overall trajectory of the labor market.
The private sector contributed to the job losses. ADP National Employment Report November private employers probably shed 32,000 jobs in November. This significant dip is evidence that labor force growth has lagged severely in all areas of the economy outside government. In reality, job growth has come to a crawl since April. In comparison, over the same period, the U.S. economy has gained barely over 119,000 jobs.
The report highlighted various industry-specific trends. Actual change in November, the manufacturing sector lost 5,000 jobs. At the same time, the overall transportation and warehousing sector had even worse news, losing an incredible 18,000 jobs. This promising growth provides a light at the end of the tunnel, even as bigger employment woes play out across the landscape.
To address these challenges, the U.S. central bank lowered the interest rate by a quarter percentage point. This decision is not just to improve the U.S. economy and labor market. In his recent testimony to Congress, Federal Reserve Chair Jerome Powell reiterated the need for a measured approach especially during these times of economic uncertainty.
“We are well-positioned to wait to see how the economy evolves,” – Jerome Powell
So the unemployment rate has returned to 4.6% in November, increasing from 4.4% in September even with ongoing efforts to shore up employment. This surge points to a mounting concern of worsening economic circumstances posing a threat to stable jobs for the average American.
Average hourly earnings for all employees on private payrolls rose by five cents. This increase raises the average wage to $36.86. The average length of the workweek has ticked up by 0.1 hour. That would imply that people who are employed may be working a little bit more hours.
As Nela Richardson, chief economist at ADP, pointed out yesterday, hiring trends have been hit or miss.
“Hiring has been choppy of late as employers weather cautious consumers and an uncertain macroeconomic environment.” – Nela Richardson
The federal government continues to bleed jobs, down 9,000 since January for a total loss of 271,000 federal positions. This trend begs the question of how sustainable this job growth will be economy-wide, let alone in these low-unemployment sectors.
Lydia Boussour, senior economist at EY-Parthenon, commented on the impact of combining payroll data from different months, highlighting potential challenges in accurately interpreting employment trends.
“Although combining two months of payroll data might seem to offer greater clarity, the absence of October’s household survey and several one-off factors will leave the report noisy and volatile,” – Lydia Boussour
Market analysts are understandably, albeit cautiously, optimistic about the positive impact that softer employment data may have on a shift in Federal Reserve policy. We got some great insights from Chris Larkin, managing director of trading and investing, E*TRADE from Morgan Stanley. He implied that the Fed should be more dovish if job figures do not come down a lot.
“As long as the numbers don’t suggest employment is falling off a cliff, the markets may embrace soft data because it could lead to a more-dovish Fed,” – Chris Larkin