A “Help Wanted” sign hangs in a restaurant window in Medford, Massachusetts, Jan. 25, 2023.
Brian Snyder | Reuters
Nonfarm payrolls grew slightly more than expected in November but slumped in October while unemployment hit its highest in four years, the Bureau of Labor Statistics reported Tuesday in numbers delayed by the government shutdown.
Job growth totaled a seasonally adjusted 64,000 for the month, better than the Dow Jones estimate for 45,000 and up from a sharp decline in October.
The unemployment rate rose to 4.6%, more than expected and its highest level since September 2021. A more encompassing measure that includes discouraged workers and those holding part-time jobs for economic reasons swelled to 8.7%, its peak going back to August 2021.
In addition to the November report, the BLS released an abbreviated October count that showed payrolls down 105,000. While there was no official estimate, Wall Street economists were largely expecting a decline following a surprise increase of 108,000 in September.
The October slump came from a steep fall in government employment as deferred layoffs instituted earlier this year took effect. Government payrolls were off 162,000 for the month, and fell an additional 6,000 in November.
The October decline marked the third time in six months that payrolls saw a net negative level. The BLS report also showed that August’s numbers were revised down 22,000 to show a steeper loss of 26,000, while September’s initial count was pushed lower by 11,000.
The BLS had cautioned that the household survey, which is used to calculate the unemployment rate, will be impacted for several months by impacts from the shutdown. Challenges in capturing the October numbers led to the cancellation of both the jobs report and the closely watched consumer price index.
Despite the complications, the report painted a familiar picture of the labor market.
The jobs climate continues to be one of low hiring and low firing, impacted as well by stringent border practices under President Donald Trump that have drained the workforce of the usual influx of immigrants.
The establishment numbers showed most of the gains in November came from a familiar source — health care added 46,000 jobs, accounting for more than 70% of the total net increase. Construction rose by 28,000 while social assistance contributed 18,000.
On the down side, transportation and warehousing was off 18,000, part of a continuing trend in job losses for the sector. Leisure and hospitality also posted a loss of 12,000.
“The U.S. economy is in a jobs recession,” said Heather Long, chief economist at Navy Federal Credit Union. “The nation has added a mere 100,000 in the past six months. The bulk of those jobs were in healthcare, an industry that is almost always hiring due to America’s aging population.
From a policy perspective, the Federal Reserve has had to work a difficult line between trying to head off further weakness in the labor market while also guarding against making stubbornly high inflation worse.
At its most recent meeting, the central bank lowered its key interest rate by a quarter percentage point but signaled that the bar is higher for additional cuts. The Fed has approved three consecutive reductions since September, taking its benchmark funds rate down to a target range of 3.5%-3.75%.
“The Fed is unlikely to put much weight on today’s report given data disruptions,” said Kay Haigh, global co-head of fixed income and liquidity solutions in Goldman Sachs Asset Management. “The report on December’s employment data, released in early January ahead of the next meeting, will likely be a much more meaningful indicator for the Fed when it comes to deciding the near-term policy trajectory.”
Markets continued to put low odds on another rate cut in January. The probability was around 24.4% following the jobs report, unchanged from Monday, according to the CME Group’s FedWatch.
Fed officials have maintained that the labor market is not a source of inflation, and Tuesday’s jobs report backed up that assertion.
Average hourly earnings rose just 0.1% for the month, below the estimate for 0.3%, and were up 3.5% from a year ago, the smallest annual gain since May 2021.
The 0.1 percentage point increase in the unemployment rate was largely a function of labor force growth.
Over the two-month period, household employment actually increased by 407,000. However, that was offset partially by a rise of 323,000 in the labor force as the participation rate edged higher to 62.5%.
In other economic news Tuesday, the Commerce Department reported that retail sales were flat in September, against a forecast for a 0.1% increase, according to numbers adjusted for seasonality but not inflation. Excluding autos, however, sales increased 0.4%, better than the 0.2% estimate.
