Unemployment Edges Down to 3.7%

The U.S. added 199,000 jobs in November, and the unemployment rate fell slightly to 3.7%, according to the latest Employment Situation Summary from the U.S. Bureau of Labor Statistics.

With the unemployment rate only falling slightly from 3.9% in October, the number of unemployed persons changed little at 6.3 million. Employment growth in November was below the average monthly gain of 240,000 over the prior 12 months, but was in line with job growth in recent months.

In addition, the analysis reported that employment gains were mostly in healthcare and government, however, manufacturing saw an increase as well, reflecting the return of workers from a strike.

Key findings:

• Healthcare added 77,000 jobs, above the average monthly gain of 54,000 over the prior 12 months. Over the month, job gains continued in ambulatory healthcare services (+36,000), hospitals (+24,000), and nursing and residential care facilities (+17,000).
• Government employment increased by 49,000, in line with the average monthly gain of 55,000 over the prior 12 months. Employment continued to trend up in local government (+32,000) and state government (+17,000) over the month.
• Employment in social assistance increased by +16,000, down from the prior 12-month average gain (+23,000). Over the month, job growth continued in individual and family services (+9,000).
• Leisure and hospitality added 40,000 jobs compared with an average of 51,000 jobs per month over the prior 12 months.
• Retail trade employment declined by 38,000 in November and has shown little net change over the year. Employment decreased in department stores (-19,000) and in furniture, home furnishings, electronics and appliance retailers (-6,000) over the month. 
• Employment in manufacturing rose by 28,000, reflecting an increase of 30,000 in motor vehicles and parts as workers returned from a strike. Beyond the strike, employment in manufacturing has shown little net change over the year.
• Transportation and warehousing lost 5,000 jobs. A job loss in warehousing and storage (-8,000) was partially offset by a gain in air transportation (+4,000). Employment in transportation and warehousing has declined by 61,000 since a peak in October 2022.
• Employment in information changed little (+10,000). Motion picture and sound recording industries added 17,000 jobs, mostly reflecting the resolution of recent strikes. Overall, employment in the information industry has declined by 104,000 since reaching a peak in November 2022. 
• Average hourly earnings for all employees on private nonfarm payrolls rose by 0.4%, to $34.10. Over the past 12 months, average hourly earnings have increased by 4%. Average hourly earnings of private-sector production and nonsupervisory employees rose by 0.4%, to $29.30.

The takeaways:

NAR Chief Economist Lawrence Yun commented:

“Jobs are still being added to the economy, with 199,000 net new payroll gains in November. Compared to the peak employment prior to the pandemic in early 2020, there are 4.7 million more Americans working now. Mortgage rate movements may determine entry timing, but jobs are the source of long-term housing demand, which keeps growing. Wage growth decelerated to 3.96%, which is the slowest since three summers ago. This is partly due to more Americans coming off the bench to enter the labor force. The COVID stimulus money is mostly gone. Despite the lower wage gains, living standards slightly increased as the consumer price inflation was 3.2%. The higher wage gains of 6% during last summer were wiped away by 9% inflation. So, softer wages will help move the overall inflation rate lower. This also means the Federal Reserve must consider a rate cut or two—or three—in 2024.”

Dr. Selma Hepp, chief economist at CoreLogic, commented:

“While the labor market continues to show signs of cooling, the cooling is falling in line with the soft-landing narrative—number of jobs are growing at a slower pace, wage growth also slowing down and relatively low number of layoffs—all leading to a modest rise in unemployment rate, which suggest cooling of the U.S. economy in the coming year.”

Realtor.com Chief Economist Danielle Hale commented:

“The November jobs report, published today, showed that companies added 199,000 workers to payrolls, a modest uptick from October’s payroll data, but below the 240,000 monthly average for the previous 12 months. Unemployment dipped slightly to 3.7%, signaling a smaller share of job seekers in the labor force. While industries like healthcare and government saw job gains, there were fewer workers on payrolls in the retail sector, and industries such as construction and professional and business services saw little change. The end of recent labor strikes boosted manufacturing payrolls. 

“Today’s report along with next week’s inflation data will be a key input in the Fed’s assessment of the economy and appropriate monetary policy at its December meeting. Following its November meeting, Chair Powell noted that Fed decision makers were looking to gain confidence that current policy is sufficiently restrictive, and that key question is likely to frame discussion in next week’s meeting. Today’s job market data is likely neutral, potentially bolstering the importance of next week’s inflation reading. The November jobs report is too strong to augment the case that the committee has done enough, but it’s not so strong that it alone justifies another rate hike.”

MBA SVP and Chief Economist Mike Fratantoni commented:

“The pace of job growth picked up slightly in November, with an increase of 199,000 compared to 150,000 in October. As in recent months, job growth has been concentrated in just a few sectors, notably health care, government, and leisure and hospitality, while employment is little changed or declining in other sectors. Wages increased at a 4% rate over the past year, a pace likely too rapid to be consistent with the Fed’s 2% inflation target. These trends, in combination with the drop in the unemployment rate to 3.7% from 3.9% in October, paint a picture of a job market that is still strong, even though the number of job openings has declined, and at least some sectors are seeing an increase in layoffs.

“Construction employment was flat for the month. We expect that homebuilders will continue to be the key source of housing supply next year, so we might see further employment growth in the sector, even if the economy slows as we anticipate.

“Inflation is declining, but further declines are likely dependent upon some slowing in the job market. We continue to forecast that the Fed will begin to cut rates in the spring of 2024, as job market trends are likely to weaken from here.”