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The U.S. jobs machine is still humming. Employers added 266,000 jobs and the unemployment rate matched a 50-year low in November. The one soft spot so far this year: subdued wage growth. Even so, strong payroll gains should help fuel an economic expansion driven by consumer spending.
KEY THEMES
Stand Pat
Federal Reserve officials will feel comfortable maintaining their wait-and-see posture on interest rates after Friday’s report showing robust hiring in November. Even before the Labor Department’s latest numbers, Fed officials were prepared to hold rates steady at their Dec. 10-11 meeting. The question now is how long they stay there. The Fed lowered its short-term benchmark rate by a quarter percentage point at each of its three previous meetings. Officials have since indicated concern the economy could slow more than they expect, making it possible that they would need to cut interest rates again next year. They have said the outlook would have to deteriorate for them to make such a move, Nick Timiraos writes.
Welcome Back
Overall payrolls got an assist from General Motors employees who returned to work after a 40-day strike. That also gave manufacturing a much-needed boost.
Two trends, however, remain fairly clear: Employers would have added jobs at a healthy pace even without the one-time gain from GM. And more cyclical sectors of the economy—especially manufacturing and mining—are lagging the rest of the economy.
Puzzle Pieces
The unemployment rate at 3.5% matched a 50-year low. And the underemployment rate, which includes people who have given up looking for work and those who want a full-time job but are stuck in a part-time position, matched its lowest level in 19 years.
Labor-force participation among those in their prime working years—between the ages of 25 and 54—held steady at a 10-year high in November. The share of prime-age workers with a job was also unchanged—at an almost 13-year high.
Even with a seemingly tight labor market, overall wage growth isn’t accelerating. That’s puzzled economists, who generally believe a tighter labor market should give workers more power to demand higher wages. One possible sign of building pressure in low-wage industries: Wages are growing faster for rank-and-file workers than the overall labor force.
“Wage growth has been stubbornly low and decelerating in 2019 after a false start at the beginning of the year. While the labor market is tight, it does appear that workers may have to wait for the new year to see accelerating wage gains,” said Glassdoor economist Daniel Zhao.
Fair Share
One final note: Women now make up exactly half of the labor force. The last time that happened was 2009-10, when manufacturing and construction jobs were getting wiped out in the aftermath of the recession. Now, faster service-sector growth, rather than sharper losses in goods-producing industries, is likely driving the shift.
WHAT ECONOMISTS ARE SAYING
“Christmas looks like it’s come early for workers and the U.S. job market.” —Jason Schenker, Prestige Economics
“The report suggests the Federal Reserve is doing the right thing by keeping interest rates low to ensure the longest recovery in modern economic history can be sustained—rather than peter out just as many lower- and middle-income households are starting to feel its benefits.” —Elise Gould, Economic Policy Institute
“We could see the unemployment rate drop more, and see wage gains rising above 3.5% and even 4% if our late-state expansion follows the path of previous expansions.” —Robert Frick, Navy Federal Credit Union
“The report today alleviates pressure on the Trump administration to make a trade deal with China, giving negotiators more leverage to push for a harder line.” —Daniel Zhao, Glassdoor
“Over 10 years since the official end of the Great Recession, the labor market continues to add more jobs than needed to keep up with population growth and the growth of the labor force. As we start the new year, maybe our resolution should be to not count out this labor market.” —Nick Bunker, Indeed Hiring Lab
“The strength of the labor market remains a critical underpinning to the consumer sector–overwhelmingly the primary driver of the U.S. economy today.” —Jim Baird, Plante Moran Financial Advisors
“We’re still seeing too much of the job growth going to the economy’s lowest-paid industries.” —Jeoff Hall, Refinitiv
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