November jobs report: Not enough to alter the Fed’s course

The November jobs report showed a 227,000 gain in jobs, rebounding from last month’s weather and strike-induced weakness. Despite the bounce back, with surprisingly limited revisions over the past two months, and coupled with a rise in the unemployment rate, labor demand continues to trend lower. But with wage growth still stubborn, the Fed has to proceed with significant caution. A December rate cut remains likely but, come early 2025, the Fed is likely to slow its cutting pace to every other meeting.

Non-farm payrolls
Thousands, January 2022–present

Report details

• Total non-farm payrolls increased by a solid 227,000 in November, slightly above consensus expectations, which had been calling for 220,000, and rebounding from the revised 36,000 growth seen in the prior month. With the two-month net revision only coming in at 56,000, however, the impact of the hurricanes on data collection—even amid tumbling survey response rates—may have been smaller than originally thought.
• Across industries, job growth remains most pronounced in non-cyclical areas of the economy, including healthcare and government, where payrolls expanded by 54,000 and 33,000, respectively, roughly in line with the average monthly gain over the past year. Within cyclical areas, leisure and hospitality added 53,000 jobs, largely driven by restaurants, following little growth in the prior month and well above the average of 21,000 jobs per month created over the past year. Manufacturing jobs also rebounded, led by a 32,000 increase in transportation equipment, with the BLS attributing this gain to the return of striking workers.
• Somewhat surprisingly, retail trade lost 28,000 jobs, while hiring in transportation and warehousing was also tepid, growing by only 3,000 workers. These sectors typically benefit from the start of the holiday shopping season, though the later than usual Thanksgiving this year may have pushed back hiring plans.
• The unemployment rate unexpectedly rose to 4.2%, driven by a steadily growing number of unemployed individuals who are finding it difficult to obtain a job—the median duration of unemployment has risen to 10.5 weeks, the highest since the peak of the pandemic. This is as layoff activity remained low. The unexpected decline in the labor force participation rate, falling to 62.5% from 62.6%, also diminished expectations for a significant snapback in labor supply following weather-related disruptions last month.
• Average hourly earnings accelerated by 0.4% in the month, which was higher than expected, keeping the annual rate at 4.0%. Recent earnings growth has so far remained solid, with the three-month annualized rise in wages staying at around 4.5%.