The economy gained 263,000 jobs in November, more than expected, an encouraging sign that the Federal Reserve‘s interest rate hikes have not yet led to a downturn.
The new figures reported by the Bureau of Labor Statistics Friday morning provide reassurance about the strength of the economy. The unemployment rate remained at 3.7%, a low figure by historical standards.
“Aggregate, stronger than expected — certainly we’re seeing evidence of weakness in the goods area of the labor market, but services are still relatively strong,” Brian Marks, executive director of the University of New Haven’s Entrepreneurship and Innovation Program, told the Washington Examiner after the report was released. “We’re seeing improvements clearly in leisure and hospitality and also in healthcare, all things that have lagged in the recovery.”
Still, other parts of Friday’s report were not as encouraging. Labor force participation, the share of adults working or looking for work, shrank very slightly to 62.1%. Participation and overall employment rates have still not recovered from the hits they took in the pandemic.
On the other hand, wage growth remained strong — average hourly earnings have grown 5.1% over the past year. Those gains have been undercut by inflation, though, meaning that workers have been losing purchasing power.
JOBLESS CLAIMS DECLINE AS FED EYES MORE RATE HIKES
Friday’s report is being closely scrutinized as it is the last such one before the Federal Reserve’s top officials convene in Washington, D.C., this month to decide the extent to which they will further hike interest rates. The relatively strong report might cause the Fed to lean toward more aggressive rate increases going into the new year.
The reading follows several months of strong job gains, which has been key positive economic data President Joe Biden has touted, even as historic inflation cuts deeply into the paychecks of people across the country. The report adds to that narrative, although most economists believe a recession is still on the horizon.
Two consecutive quarters of declining gross domestic product, as seen in the first half of the year, are typically indicative of a recession, although the White House and many economists have pushed back on that notion and have highlighted the still-strong labor market.
After contracting in the first two quarters, though, GDP increased at a 2.9% annual rate in the third quarter, reversing the negative trend and further complicating the country’s economic situation.
Earlier this month, the central bank conducted another huge three-quarters of a percentage point, or 75 basis points, rate increase. It was the fourth such increase in just five months — the largest increase in four decades.
The Fed’s rate hikes have had a clear effect on the housing sector by raising mortgage rates. Home sales have fallen to the lowest levels since the pandemic, and industry analysts expect prices to come down further as well.
Other sectors, though, have stayed strong. Consumer spending has held up, and Black Friday sales shattered expectations. Industrial production, too, has not been dented by rate hikes so far.
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Recent comments from Fed Chairman Jerome Powell and other officials indicate that the central bank may dial back its aggressive hiking and raise rates by 50 basis points rather than 75 basis points.
“The full effects of our rapid tightening so far are yet to be felt,” Powell said. “Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down.”
