WASHINGTON – U.S. job growth surged in November after being severely hindered by hurricanes and strikes. However, a rise in the unemployment rate to 4.2% pointed to an easing labor market that should allow the Federal Reserve to cut interest rates again this month.
The labor market’s resilience drives the economy through strong consumer spending, with the closely watched employment report from the Labor Department on Friday showing solid wage growth last month. The economy created 56,000 more jobs in September and October than previously estimated.
“The report should soothe bears and bulls alike,” said Scott Anderson, chief U.S. economist at BMO Capital Markets. “The solid nonfarm payroll gain and strong earnings growth should keep the economic expansion on a sturdy foundation, even as a gradually rising unemployment rate moderates demand and inflationary pressures over time.”
Nonfarm payrolls increased by 227,000 jobs last month after rising by an upwardly revised 36,000 in October, the Labor Department’s Bureau of Labor Statistics said. Economists polled by Reuters had forecast payrolls would gain 200,000 jobs following a previously reported rise of 12,000 in October.
Job growth averaged 173,000 per month over the past three months. Economists had anticipated a payroll boost of at least 90,000 from the end of strikes at Boeing (NYSE: BA) and another smaller aerospace company as well as a reversal of the disruptions wrought by Hurricanes Helene and Milton.
Capital Economics estimated the total contribution was about 70,000, leaving an underlying increase in payrolls of 157,000.
“It still implies that underlying employment growth was a touch stronger than October,” said Stephen Brown, deputy chief North America economist at Capital Economics.
“That matches the message from some of the alternative indicators suggesting that conditions in the labor market are stabilizing at a healthy level.”
The acceleration in employment gains was led by healthcare, with a rise of 54,000 jobs spread across ambulatory healthcare services, hospitals, nursing, and residential care facilities.
Leisure and hospitality payrolls increased by 53,000 jobs, which were concentrated at restaurants and bars. Government employment increased by 33,000 positions, lifted by gains in state government.
Manufacturing payrolls rebounded by 22,000, with transportation equipment jobs increasing by 32,000 as the striking workers returned to the job. The rise suggests not all of the 38,000 members of the International Association of Machinists and Aerospace Workers who were on strike in October returned to work. They could be reflected in December’s data.
Social assistance payrolls increased by 19,000 jobs. Construction employment rose marginally, hinting at slow rebuilding efforts in the areas devastated by the hurricanes.
There were also gains in financial activities and professional and business services employment. Temporary help services employment rebounded slightly after dropping by 33,300 jobs in October. But the retail sector shed 28,000 jobs, mostly reflecting losses at general merchandise retailers.
A late Thanksgiving holiday also could have delayed hiring. Electronics and appliance retailers, however, added 4,000 jobs.
The share of industries reporting job growth rose to 56.2% from 53.2% in October.
Financial markets see a roughly 89% chance of a quarter-percentage-point rate cut at the U.S. central bank’s December 17-18 policy meeting, up from 72% earlier, CME Group’s FedWatch tool showed. The Fed has lowered interest rates by 75 basis points since September, when it launched its easing cycle. Its policy rate is now in the 4.50%-4.75% range, having been hiked by 5.25 percentage points between March 2022 and July 2023.
Stocks on Wall Street were mostly trading higher. The dollar advanced against a basket of currencies. Yields on longer-dated U.S. Treasuries fell.
WEAK HOUSEHOLD EMPLOYMENT
The increase in the jobless rate after holding at 4.1% for two straight months reflected weakness in household employment. The smaller and volatile household survey from which the unemployment rate is compiled showed a decline of 355,000 jobs. Household employment dropped in October as well.
Tepid hiring, rather than rising layoffs, is lifting the unemployment rate. Weekly claims for state unemployment benefits are at historically low levels.
About 193,000 people left the labor force last month, pushing the participation rate, or the proportion of working-age Americans who have a job or are looking for one, down to 62.5% from 62.6% in October.
The employment-to-population ratio, viewed as a measure of an economy’s ability to create employment, dropped to 59.8% from 60.0% in October. The number of people who have permanently lost jobs increased to 1.893 million from 1.835 million in October.
The median duration of unemployment spells rose to 10.5 weeks, the highest in nearly three years, from 10 weeks in October. That aligns with the elevation in continuing claims.
Some economists cautioned against putting too much weight on the divergence between payrolls and household employment and the continued fall in participation given the survey’s volatility.
They also argued that household employment and labor supply should have rebounded after being held down by the storms.
“Given everything else we know about the labor market, I feel safe in declaring that these November household survey figures are wholly out of line with the underlying reality,” said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets. “I would expect a rebound in household employment and a drop of at least several basis points in the jobless rate in December.”
Average hourly earnings increased 0.4% last month, matching October’s gain. In the 12 months through November, wages advanced 4.0% after rising by the same margin in October.
The average workweek increased to 34.3 hours from 34.2 hours in October. Aggregate payroll income jumped 0.8% after gaining 0.2% in October, which should continue to fuel spending.
With the economy expanding at a healthy pace, inflation stuck above the central bank’s 2% target and uncertainty about the policies of President-elect Donald Trump’s incoming administration, the outlook for further rate cuts in 2025 is unclear.
Business sentiment perked up in the aftermath of Trump’s victory in the Nov. 5 election on hopes of less regulation and tax cuts. But his promises to raise tariffs on imports and carry out mass deportations of migrants have raised concerns of higher prices and labor market disruptions.
“While these measures can stimulate job growth and raise wages, they need careful implementation to balance potential inflationary risks and fiscal deficits,” said Sung Won Sohn, a finance and economics professor at Loyola Marymount University. “Their effectiveness will depend on how they interact with monetary policies and global economic trends.”
