November jobs report: More evidence of a strong but softening labor market

Market response

December 8, 2023 | 2 min read

In November, the economy added 199,000 nonfarm payroll jobs, just below the 3-month average of 204,000, providing further evidence of gradual cooling across the economy. Payrolls for the prior two months were also revised down by 35,000, suggesting the labor market was somewhat weaker than originally believed. The unemployment rate strengthened from 3.9% to 3.7%, and labor force participation remained flat at 62.8%. These figures further suggest that the economy will continue to slow gradually in 2024 and are likely to further dissuade the Federal Reserve from hiking at its December meeting.

Report Details

  • Total nonfarm payroll employment increased by 199,000 in November. The November payroll gains were below the 12-month and 3-month averages of 233,000 and 204,000, respectively. September’s strong gains of 336,000 have now been revised down twice to their final number of 262,000. November’s payroll numbers reflected the return of 30,000 autoworkers as labor strikes were resolved. Without the effect of these strikes, employment would likely have been 30,000 higher last month and 30,000 lower this month.
  • The health care and government sectors have shown strong job gains of 76,800 and 40,000, respectively. In more economically sensitive sectors, such as retail trade and temporary help services, payrolls declined by 38,400 and 13,600, respectively. This divergence across industries may be an early indicator of additional cracks forming in the labor market.
  • While payroll employment was just under consensus expectations of 183,000, data from the Household Survey was stronger than expected. Unemployment declined to 3.7%, below forecasts of 3.9%. Average hourly earnings, an important indicator of labor market tightness, accelerated in November from 0.2% to 0.4% on a month-over-month basis. On a year-over-year basis, average hourly earnings were flat at 4.0%—identical to the latest Core Consumer Price Index reading.

November’s jobs report was broadly consistent with a gradually slowing economy. Other labor market data, such as job openings, which have fallen to the lowest levels since 2021, also indicate that the economy is cooling. These numbers are consistent with slower hiring demand as consumers spend their excess savings, high interest rates pass through to businesses and consumers, and firms position more cautiously for the coming year.

Although the U.S. economy has avoided a recession this year, these economic impacts are likely to be more pronounced in 2024. This could open the door for the Fed to begin gradually cutting rates around mid-2024 in support of the economy while preventing a resurgence in structural inflation, and will likely present greater opportunities for investors after two challenging years.

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