New Jobs Report: Seesaw Pattern Over Recent Months – Fed Will Be Cautious

The Bureau of Labor Statistics released its jobs report for November this morning. The numbers are strong, dispelling any concerns of a major labor market slowdown – though the pattern over the past several months is very uneven.

Payroll growth bounced back strongly from a very weak report in October, rising to 227,000 (up from 36,000). Payroll growth was strongest in healthcare (54,000), leisure and hospitality (53,000), and government (33,000) – in fact, these sectors accounted for over 60 percent of payroll increases. The October number was weakened by the Boeing strike and hurricane damage in the Southeast, though it still would have been just over 100,000 had these events not occurred.

Over the past 4 months, payroll growth has followed a seesaw pattern – increasing 78,000 in August, 255,000 in September, 36,000 in October, and 227,000 in November. The previously reported numbers for September and October were revised upward. Over these months, payroll growth has averaged 149,000 – still fairly strong, though less than in earlier 2024 or the previous few years.

Wage growth has also been fairly strong – 4.4 percent last month but 4.8 percent over the past 2 months, compared to 4.0 percent over the past 12. Productivity growth has averaged a bit under 2 percent this year, potentially leading to some concern that wages are rising a little too quickly for comfort.

The numbers from the household survey showed less momentum. The unemployment rate ticked up very modestly to 4.2 percent, but the employment rate out of the population dropped below 60 percent for the first time in over 2 years. Labor force participation also dropped to 62.5 percent, the lowest level since May.

And other measures, such as the average duration of joblessness for the unemployed, showed a mixed pattern – with increases among the longer-term unemployed (of 6 or more months) but also the newly unemployed. The largest increase in the numbers of unemployed workers occurred not among job losers but in the category of “new entrants,” who are usually young workers entering the market after finishing school. These workers often are the first to be affected by a softening job market, and we will see how they fare in the coming months.

What does all of this mean for the job market, and for further interest rate cuts by the Federal Reserve? It is not unusual for the household and payroll results to diverge in any month, and the patterns over several months are more consistent – with both slowing somewhat but also continuing to show labor market strength. Other measures like the job vacancy rate have also showed some unevenness, with a drop in September (to 4.4 percent) but some recovery in October (to 4.6 percent).

Will the Fed reduce interest rates again in mid-December, as it did at each of its last two meetings? It might consider one more quarter-point reduction prudent, to solidify the effects of its earlier rate cuts. But enthusiasm for further reductions will likely be reduced by this month’s strength, and by an average pattern over several months that, despite the recent see-saw, shows a reasonably healthy labor market.