• Job growth rebounded in November to 199,000 with the end of the autoworkers strike.
• The unemployment rate fell to 3.7% in November, while the labor force participation rate rose.
• Wage growth was solid but continues to slow.
• This report is consistent with a softening labor market and easing labor market inflationary pressures because of contractionary monetary policy.
• PNC expects the FOMC to keep the fed funds rate unchanged when it meets next week.

The U.S. economy added 199,000 jobs in November from October according to a survey of employers from the Bureau of Labor Statistics, in line with consensus expectations. This included an increase of 30,000 in motor vehicle and parts manufacturing as striking UAW members returned to the job. Job growth in October was unrevised at 150,000, while job growth in September was revised lower to 262,000 from 297,000. Job growth was softer in October because of the UAW strike.

Over the past three months the economy has added just more than 200,000 jobs per month on average, down from above 300,000 at the beginning of 2023. This gradual easing in job growth is what the Federal Reserve wants to see. Over the long run the U.S. economy can add around 150,000 jobs per month, consistent with underlying growth in the number of available workers, and job growth is slowing toward this pace.

The private sector added 150,000 jobs in November, with government employment up by 49,000.

The unemployment rate fell to 3.7% in November from 3.9% in October. There was a very large increase in employment from a survey of households (different from the survey of employers) of 747,000. However, this number is much more volatile month-to-month than job growth as measured in the employer survey. Over the past three months employment growth in the household survey has averaged around 160,000.

The labor force participation rate, the share of adults working or looking for work, rose slightly to 62.8% in November from 62.7% in October; the participation rate was also 62.8% in August and September. This is the highest the labor force participation rate has been since before the pandemic, when it was consistently above 63%.

Goods-producing industries added 29,000 jobs in November. Manufacturing employment rose by 29,000 over the month with the end of the UAW strike, after manufacturing job losses of 35,000 in October. Construction employment rose by a scant 2,000 in November as higher interest rates were a drag. Private services-providing industries added 121,000 jobs in November, including gains of 99,000 in education and healthcare and 40,000 in leisure/hospitality services. Employment was down by 38,000 in retail trade over the month, as retailers cut back on their typical seasonal hiring heading into the holidays. Employment in professional/business services fell by 9,000 in November, including a decline of 14,000 in temporary help; this category tends to lead trends in the overall job market.

The average workweek was up slightly to 34.4 hours in November from 34.3 in October; the return of the autoworkers contributed to the increase. Average hourly earnings rose 0.4% over the month (0.353% before rounding). Average hourly earnings increased by 0.2% in October. Again, the end of the strike contributed to stronger wage growth in November relative to October. On a year-over-year basis average hourly earnings were up 4.0% in November, down from 4.1% in October; wage growth is gradually slowing to a pace consistent with the Federal Reserve’s 2% inflation objective.

With more jobs, higher wages, and a longer workweek, aggregate labor market income rose a strong 0.7% in November, after no increase in October.

The November jobs report was close to what the Federal Open Market Committee wanted to see heading into its policy meeting next week. Job growth is gradually easing to a more sustainable pace, and wage growth is solid but slowing. PNC expects the FOMC to hold the fed funds rate unchanged next week in its current range of 5.25% to 5.50%. The fed funds futures market is currently pricing in a 98% probability of no change to the fed funds rate next week. 

The key uncertainty for the labor market in 2024 is whether job growth slows to a more sustainable pace, or whether the economy moves from monthly job gains to monthly job losses. The former would be consistent with the Fed’s “soft landing” scenario, while the latter would mean recession. PNC still thinks recession is the more likely outcome in 2024, but it is a close call.