Job creation slowed considerably in November as the economy added 155,000 new jobs for the month, falling well short of consensus expectations for a 190,000 increase. Downward revisions to the preceding two months trimmed another 12,000 from that tally.
The unemployment rate was unchanged at 3.7%, holding near a half-century low. The estimated number of unemployed individuals declined by about 100,000, while the labor force continued to grow – now up by over 2.2 million in the past year.
Despite those tight labor market conditions, wage growth was tepid in November – rising by just 0.2% for the month. Still, some acceleration in wage growth is apparent in the 3.1% growth rate over the past year.
One of the bigger headwinds to stronger wage gains is the persistently weak productivity growth in the economy. On that note, there may be a glimmer of hope, as productivity increased by 2.3% in the third quarter – a much stronger result than the 1.3% trend over much of the past decade. With the competition for skilled labor still intense, a sustained resurgence in productivity growth should not only provide a boost to wage growth, but will be essential to sustaining above-trend growth in the broad economy.
It’s important to note that the labor market remains on a very solid footing. Like the broad economy, there are signs of a modest slowdown. Jobless claims have quietly crept higher in the past few months, albeit from half-century lows. Even with that moderate increase, layoffs remain exceptionally low.
For employers, the focus today cannot be on simply finding workers to fill openings; it’s about attracting qualified workers and, more importantly, keeping the skilled workers that you already have and finding ways to leverage their skills to an even greater degree.
The bottom line is that there is a huge difference between slower growth and an economy – and labor market – that is reaching stall speed. There’s no question that the pace of the expansion is slowing, and that is apparent in the jobs report as well. Still, it’s a matter of perspective. The risk of recession still appears to be quite limited, and the jobs market still looks quite favorable for those looking for work. There’s a vast difference between slower growth and no growth.
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