U.S. Employment (November 2023)

Job growth rebounds in November, unemployment rate ticks lower

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• Non-farm payroll employment rose by 199k in November, slightly ahead of expectations calling for a gain of 185k. Employment figures for September were revised lower by 35k, while October numbers were unchanged.

  • Hiring over the last three-months averaged 204k jobs per-month, a slight uptick from the 192k averaged between August-October but well off the 334k averaged over the three-months ending in January.

• Private payrolls rose by 150k – a rebound from the 85k reported in October - with service sector (+121k) gains largely concentrated in healthcare & social assistance (+93.2k) and leisure & hospitality (+40k).

• Meanwhile, retail trade (-38.4k), professional & business services (-9k) and transportation & warehousing (-5k) all shed jobs last month. Goods-producing industries (+29k) were lifted by a strong gain in manufacturing (+28k), although this was entirely due to the resolution of the auto worker strike. The public sector had another solid month of hiring, adding 49k jobs.

• In the household survey, employment (+747k) rebounded sharply – more than offsetting last month's pullback – and eclipsed a solid gain in the labor force (+532k). As a result, the unemployment rate ticked down by 0.2 percentage points to 3.7%. The participation rate rose by 0.1 percentage points, returning to its cyclical high of 62.8%.

• Average hourly earnings were up 0.4% month-on-month – an acceleration from last month's 0.2% m/m gain and the strongest monthly reading since August. The 12-month change held steady at 4.0%, while the more truncated thee-month annualized rate of change ticked up to 3.4% (from 3.0% in October).

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• Job growth rebounded in November, in part due to the resolution of the auto worker strike, which helped to add back ~30k workers to last month's payrolls. Looking through the monthly volatility, the trend in hiring has slowed relative to the +300k pace seen at the beginning of the year. However, with the three-month moving average still hovering at just over 200k jobs-per-month, today's job growth is still running at a pace that's more than double trend growth in the labor force.

• Term yields have significantly retraced from their mid-October highs as favorable readings on inflation and signs that the labor market is gradually cooling have led market participants to pull-forward the timing of rate cuts. CME futures currently show investors pricing in 125 basis points of rate cuts by the end of 2024, with the first cut coming in March. We view this as premature, particularly given the inflation embers are still glowing and could very easily be reignited by still elevated wage pressures. Policymakers will need to see more compelling evidence that the labor market is on a sustained path towards rebalancing before pushing ahead with any rate cuts. This is unlikely to happen until the second half of next year.