Employers added 263,000 workers in November, even as some industries showed signs of a slowdown. Wage growth exceeded expectations

WASHINGTON, D.C. (TIP): America’s jobs engine kept churning in November, the Labor Department reported Friday, December2, a show of continued demand for workers despite the Federal Reserve’s push to curb inflation, largely by tamping down hiring. Employers added 263,000 jobs, even as a wave of layoffs in the tech industry made headlines. That was only a slight drop from the revised figure of 284,000 for October. The unemployment rate was unchanged at 3.7 percent, while wages were 5.1 percent higher than a year earlier, a bigger rise than expected.

Those signs of strength perpetuate a strange duality: While a strong labor market may benefit workers in the short term, it could strengthen the Fed’s resolve to raise rates even further, which would increase the likelihood of a recession in 2023. “It upsets some of the narrative going into the report, which was that things are slowing down,” said Neil Dutta, head of U.S. economics at Renaissance Macro. “The reason that this matters for everyone is that the Fed still sees the labor market as the mechanism by which they can solve the inflation problem.”

Despite steady employment growth, the impact of higher interest rates is already evident. Hiring in goods-producing sectors like manufacturing and residential construction — which are more sensitive to rising borrowing costs — has slowed substantially, and the number of hours worked fell, mainly because of those industries. But robust hiring in health care and hospitality, where wages have also grown most rapidly, powered continued gains.

Wages continue to increase, though still not at the pace of inflation. Although inflation has been propelled by a variety of factors including the Russian invasion of Ukraine and rapid shifts in demand, the latest data may trouble the Fed chair, Jerome H. Powell, who has focused on inflation in service industries, where wages make up a large share of costs. “That could be enough to offset what should be a decline in goods pricing and inflation pressures,” said Andrew Patterson, a senior international economist at Vanguard. “It hints at a move in a direction that the Fed does really not want to see.”

(Source: The New York Times)