Employment report will show a rebound

December 2, 2024

Payroll employment is expected to rise by 210,000 in November as workers return to work following disruptions due to storms and strikes. Public sector payrolls are expected to add 20,000 jobs, buoyed by ongoing gains at the state and local levels. Tighter budgets for fiscal 2025 suggest a slowdown in those gains from what we have seen since mid-2023.

Private sector gains are expected to be driven by ongoing strength in healthcare and social services, temporary workers and the leisure and hospitality sector. The latter two were worst affected by storm disruptions. Employment at amusement parks and casinos was also hit hard by evacuations and closures.

That is all in addition to the bump in hiring associated with record travel over the Thanksgiving holiday. The cruise industry saw a 20% increase in Thanksgiving in bookings compared to last year.

Construction employment will likely expand with repairs and rebuilding following the hurricanes. Manufacturing hiring is poised for recovery with the aerospace industry’s return from strikes and related layoffs.

Retail hiring slowed during the second half of the year when retailers were forced to offer discounts to keep consumers shopping. More holiday shopping has moved online, which has shifted where retailers need to hire. Most expected to keep hiring close to 2023 levels, which resulted in a decline after seasonal adjustment.

Average hourly earnings are expected to rise only 0.2%, half the pace of October. A shift in the composition of hires to lower wage workers is expected to contribute to that slowdown, which will translate to a 3.8% increase in average hourly earnings from a year ago; that’s down from a 4% pace in October. The silver lining is that average hours worked should rise a tick to 34.4 hours; storms and strikes reduced the number of hours worked last month.

Separately, we have forecast the unemployment rate to edge up to 4.2%. The bulk of that increase is expected to come from a slight move up in the participation rate to 62.7%. There is a risk that rate will fall with immigration curbs. Foreign-born workers participate in the labor force at a higher level than the native born. That’s on top of the ongoing drag to participation triggered by baby boom retirements.

The duration of unemployment has been moving up and is now above the pre-pandemic level. It is harder to find a job once lost. That and recent downward revisions to employment in the census data suggest the labor market could be weaker than it appears. This is something that the Federal Reserve is watching closely as it is trying to navigate a soft landing.