November Job Growth Soundly Beats Expectations

 

Roy Maurer By Roy Maurer December 6, 2019
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November Job Growth Soundly Beats Expectations

U.S. employers added 266,000 new jobs in November, according to the latest Bureau of Labor Statistics report, the highest total reported since January. Unemployment ticked down to 3.5 percent, matching a 50-year low.

In addition to the much-better-than-expected November gains (economists had forecasted around 180,000 new jobs), the September and October numbers were revised up by a combined 41,000. Monthly job growth has accelerated since the summer, averaging 205,000 new roles over the past three months, up from just 135,000 in July.

"The November jobs report crushed expectations," said Michael Stull, senior vice president of staffing and recruiting firm ManpowerGroup North America.

"Cancel the labor market slowdown—job gains were broad as well as deep," said Josh Wright, chief economist for recruitment software firm iCIMS in Holmdel, N.J.

Employment gains got a boost from the return of about 40,000 striking General Motors autoworkers added as new jobs in November, "but even excluding that bump, payrolls would've still cleared the 200,000 mark," said Daniel Zhao, Glassdoor senior economist.

"Looking at the high number of jobs, you might forget that the story for most of this year was that the economy was slowing down," said Nick Bunker, an economist at the Indeed Hiring Lab. "The slowdown did happen, but we can move into 2020 with a bit more optimism. Employment growth through 2019 has averaged at 180,000 new jobs per month through November, which is the same as 2017. This is more of a return to a previous trend than the beginning of a new downward trend."

The BLS data is at serious odds with ADP's recent estimate of private-sector job gains released Dec. 4, which showed a meager 67,000 jobs added. It may be confounding but not too surprising—counts from ADP and BLS are often at odds, and only over longer periods of time do they generally show similar trends. The divergence comes from the two reports' methodologies. BLS compiles responses from a survey of employers while ADP uses its clients' payroll data to estimate job gains. ADP believes that their reporting more closely aligns with the government's final, revised numbers, which incorporate late survey responses.  

Employers in 2019 have been adding jobs at a solid pace to absorb new labor market entrants and keep the unemployment rate low, though the pace of job growth is down from last year.

"Job growth has outpaced population growth and labor force growth in 2019 but [is still] the slowest year for job gains since 2012," said Julia Pollak, a labor economist at employment marketplace ZipRecruiter. "The economy needs to add about 105,000 jobs to keep pace with population growth and about 170,000 to sustain the recent pace of labor force growth."

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Two Stories

Hiring data continues to show a bifurcated economy with service-oriented industries hiring at a solid pace, while goods-producing sectors like manufacturing and construction have been coming up short.

The service sectors continued a yearlong trend of strong employment growth, adding 206,000 jobs last month. Gains in November were led by leisure and hospitality (45,000 jobs added), health care (45,000) and professional and business services (38,000).

"Even retail trade eked out a small gain in payrolls—a measly 2,000 but only the fourth month of gains this year," Wright said. "The holidays seem to have played a significant role, with gains driven by department and general merchandise stores. Transportation and warehousing had a strong month as well, as the line between that industry and retail continues to blur. With a gain of 15,500, it had its strongest month since June, and the gains were overwhelmingly in the retail-related categories of warehousing and couriers."

Goods-producing industries didn't fare as well, producing 48,000 jobs, the majority of which can be attributed to the returning GM strikers. Mining and logging lost 7,000 positions in November.

Construction grew by 1,000 jobs.

The data continue to show an overall softening in manufacturing, with signs of some stabilization in November, but the industry has not yet recovered from the declines of the last few months, Stull said.

"Manufacturing has had a slow year, but not a terrible one," Pollak added. "Manufacturing has gained 56,000 jobs so far this year. That's nowhere near as good as last year, when it gained 264,000, but far better than in 2016, when it lost 7,000. In other words, the U.S. has largely managed to avoid the global manufacturing slowdown, in spite of a trade war that made it hard for manufacturers to plan and disrupted many manufacturers' supply chains."

Unemployment Ticks Down

The nation's unemployment rate dropped in November from 3.6 percent the previous month. The number of unemployed decreased by 44,000 to 5.8 million.

"This is the 21st month in a row when unemployment has been at or below 4 percent," said Elise Gould, senior economist at the Economic Policy Institute in Washington, D.C. At the same time, the labor force participation rate fell slightly as the prime-age employment-to-population ratio held steady, matching its peak rate before the Great Recession began, but still significantly lower than its peak in 2000, she said.

And labor market slack is still declining, Wright said. "Long-term unemployment declined by 40,000 and involuntary part-time work declined by 116,000, driving the U-6 underemployment rate back down to 6.9 percent from 7 percent."

Wages Remain Stubborn

Average hourly earnings for private-sector workers rose 7 cents to $28.29. Broken out from the total, wages rose for nonmanagerial workers by 7 cents to $23.83.

"Wage growth actually slowed to 3.1 percent from an upwardly revised 3.2 percent previously reported as 3 percent," Wright explained. "And there appears to be a growing divergence between wage growth for managers versus nonmanagers. That's a good sign for lower-income groups, but it raises new questions about where exactly the labor market stands."

Wages for nonsupervisory employees rose significantly faster than the overall, increasing 3.7 percent over the year, Gould said. "It is important to remember that periods of stronger wage growth for nonsupervisory workers in this recovery tend to be followed by periods of relatively weaker growth. A promising sign if the stronger trends continue, but the slowdown for all private sector workers is still troubling."

Zhao added that 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."

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