Employment rebounded in November

December 6, 2024

Payroll employment rebounded by 227,000 jobs in November after an upwardly revised 36,000 in October. The three-month moving average moved up to 173,000 from 123,000. A rebound following strikes and storms amplified November gains.

Public sector payrolls increased by 33,000. Gains were dominated by increases at the state and local levels. Gains occurred in both education and noneducation jobs, likely including a boost to cleanup and repairs following two major hurricanes. Federal employment dropped slightly as the rate of retirees, mostly postal workers, accelerated.

Private sector gains were dominated by a 72,300 gain in healthcare and social assistance and a 53,000 gain in the leisure and hospitality sector. Manufacturing moved up 22,000 as workers returned to the aerospace plants following strikes. That offset weakness outside the aircraft industry. Recent surveys from the Institute for Supply Management (ISM) revealed a pickup in service sector gains in November, but continued weakness in manufacturing activity.

Professional and business services rose 26,000, driven by gains in architectural, engineering and related services. Those gains are supported by IRA and Chips Act funds and the almost insatiable demand for data centers. In a related move, specialty nonresidential construction added 7,000 jobs.

Financial services employment increased, mostly via nonbank lenders, by 17,000. That includes fintech and larger private lenders in private equity and hedge funds.  

The retail sector lost 28,000, mostly in department stores. A shortened holiday shopping season between Thanksgiving and Christmas, a pivot online and efforts to offer more discounts to lure consumers into stores accounted for the weakness in hiring.

Average hourly earnings rose by 0.4%, the same as the prior month. That translates to a 4.0% increase from a year ago, roughly the same as October, which was revised up. The Federal Reserve’s Beige Book revealed that entry-level wages and those for specialty trade workers are an outlier and accelerating. Gains were concentrated in the services sector. Retail and wholesale trade and professional business services posted the largest wage gains.

The number of hours worked rose to 34.3 from 34.2 as workers returned following strikes and storms. Average weekly earnings increased 3.7%, the same as October.

Separately, the unemployment rate rose a tick to 4.2%, despite a drop in participation in the labor force. The decline hit workers over the age of 55. The overall labor force contracted during the month as the ranks of the unemployed edged up, while those of the employed moved down. The number of both foreign- and native-born workers fell.

The ranks of multiple job holders rebounded after falling last month. Those workers were the most vulnerable to storm disruptions. The duration of unemployment rose, which means it is still taking longer to find a job once a worker loses one. That is despite an improvement in consumer confidence regarding job prospects in November; those under 35 in the middle part of the income strata saw the largest improvement. Those shifts, coupled with reports that entry-level workers are seeing wages accelerating, could signal an improvement in labor market conditions as we turn the corner on the year.   

The labor market remains on firm footing with employment gains rebounding nicely from strike and storm disruptions. The three-month moving average suggests that employment gains are accelerating. The slight move up in unemployment raised hopes that the Federal Reserve may be able to cut rates again in December. However, we still have another month of inflation data due out next week, which will determine what the Fed does. Service sector inflation has proven stickiest and is where the employment and wage gains remained the strongest. A December rate cut is still a flip-of-a-coin decision for the Fed.

Separately, the preliminary release of consumer sentiment from the University of Michigan (UM) came out today. It jumped to the highest level since April, which is when UM started to move the survey online. Current economic conditions improved dramatically but for the wrong reason for the Fed: Consumers are planning to buy ahead of feared price hikes due to tariffs.