Unemployment holds steady at 4.1% despite strong payroll gains.
Given the recently solid pace of economic growth and persistently lofty business sentiment, it shouldn’t be surprising that job creation remains robust; and it was definitely that again in November.
Job market conditions remained strong in November, as employers added 228,000 new jobs during the month, easily topping expectations for 195,000 to 200,000. Revisions to September and October were modest in total, adding another 3,000. On the whole, the combined increase was not only positive, but much better than expected.
Although the bulk of the jobs were created in the service sector, which is to be expected, gains were solid in manufacturing and construction as well – a very positive sign from a cyclical perspective.
Despite that gain, the unemployment rate was unchanged at 4.1% for the second consecutive month, matching its lowest point since 2000.
Against the backdrop of better growth and increasingly tight labor markets, it’s unsurprising that consumers are, in general, a confident lot, feeling positive about their job stability and household financial situation.
Having said that, one persistent area of disappointment in the report again this month is the limited growth in average hourly earnings, which rose only modestly in November and increased by a moderate 2.5% over the past year. It is important to note that average hourly earnings is only one way to gauge wage pressures and other measures of labor costs are rising more rapidly. Nonetheless, wage growth has been slow to recover in the aftermath of the last recession, although the negative effect of slow wage growth is mitigated in part by persistently low inflation as well.
While the September hurricanes were briefly disruptive, job creation has bounced back sharply in the past few months, and the employment picture remains strong. While a Fed rate hike next week is a foregone conclusion, investors remain skeptical about the Fed’s suggested policy path for 2018, and the change in leadership at the Fed adds an additional layer of uncertainty. Nonetheless, a robust labor market appears likely to keep the Fed vigilant against allowing the economy to overheat.
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