November saw a significant pick-up in U.S. employment growth as thousands of actors and autoworkers returned to the workforce following strikes; nevertheless, the underlying trend is likely to indicate a cooling labour market.
Views that the Federal Reserve is done hiking interest rates this cycle will be reinforced by the Labour Department's carefully anticipated jobs report on Friday, which is also expected to show wages improving gradually and the unemployment rate remaining constant at almost a two-year high of 3.9%.
However, given that job growth is expected to continue to be far higher than the 100,000 jobs per month required to keep up with the population's increase into working age, this could deflate investor hopes that the US central bank could reverse course and start lowering interest rates as early as the first quarter of 2024.
Next Wednesday, the Fed is anticipated to maintain current rates. Since March 2022, it has increased its policy rate by 525 basis points, bringing it to the current range of 5.25%–5.50%.
"We're looking for more evidence that restrictive monetary policy and tight credit conditions are having the desired effect, dampening inflationary pressures, not only in the economy more broadly, but also the labor market," said James Knightley, chief international economist at ING in New York.
"I don't think the Fed will be signaling a desire to cut on the scale that the market is looking to price right now, but they will be pretty happy with the evidence of the cooling jobs market."
According to a Reuters survey of experts, nonfarm payrolls probably grew by 180,000 jobs last month after increasing by 150,000 in October. Government data indicated that the United Auto Workers (UAW) union's approximately 25,300 members ceased their strikes against Detroit's "Big Three" automakers on October 31, which caused a decline in manufacturing payrolls for that month.
There are still at least 5,000 striking UAW workers, most of them are employed by Mack Trucks. Payrolls were probably helped by the 16,000 SAG-AFTRA actors union members who returned to work.
Even so, job growth would fall short of this year's 238,800 job monthly average. The need for labour is decreasing as the economy's overall demand is reduced by the Fed's significant rate increases.
This Monday, the government said that October had the fewest job opportunities since August 2021, with 1.34 positions available for every unemployed person.
The Fed's Beige Book report from last week described the labour market as having "continued to ease" and stated that "most districts reported flat to modest increases in overall employment" from early October through mid-November. These reports add to the anecdotal evidence of decreasing hiring.
A sign of future hiring, temporary assistance has decreased for the most part of this year. Additionally, from 34.6 hours in January to 34.3 hours in October, the average workweek has decreased. At that point in November, it should have remained unchanged.
However, not all economists concur that there is a softening of the labour market; others contend that large segments of the economy—particularly in the service sector—remain understaffed.
According to a poll conducted this week by the Institute for Supply Management, companies in the services sector reported having "issues" in November with filling open positions as a result of regular attrition. "Trying to get to full staff levels" and "the labour market remains very competitive" were two other remarks made.
"We're not convinced that the labor market has really slowed abruptly here," said Dean Maki, chief economist at Point72 Asset Management in Stamford, Connecticut. "The underlying trend in job growth remains pretty healthy."
Since April, when it was 3.4%, a 53-year low, the jobless rate has increased. On the other hand, rather than businesses firing employees, the increase has been caused by an increase in the labour supply. Although there was a chance that November's unemployment rate may reach4.0%, economists advised against reading the increase as a sign of weakening labour market conditions.
"More people are coming into the labor force, and they're counted as unemployed when they come in," said Dan North, senior economist at Allianz Trade North America. "It's not companies firing people. So, it's not the usual dynamic that would make one concerned."
The Fed is working harder to bring inflation down to its objective of 2% since the growing labour pool is reducing wage growth.
The average hourly wage is expected to increase by 0.3% following a 0.2% increase in October. This would cause the yearly pay increase to drop to 4.0%, the lowest increase since June 2021, from 4.1% in October.
Modest salary increases would complement recent data indicating October's decline in inflation.
Although that would tighten consumer spending this quarter and going forward, analysts do not anticipate a recession; rather, they see a period of muted growth. The majority did not notice job losses in the economy until the second quarter of 2024.
"We may have some quarters of virtually flat growth, overall, very very slow growth for the whole year," said North.
(Source:www.fortune.com)
Views that the Federal Reserve is done hiking interest rates this cycle will be reinforced by the Labour Department's carefully anticipated jobs report on Friday, which is also expected to show wages improving gradually and the unemployment rate remaining constant at almost a two-year high of 3.9%.
However, given that job growth is expected to continue to be far higher than the 100,000 jobs per month required to keep up with the population's increase into working age, this could deflate investor hopes that the US central bank could reverse course and start lowering interest rates as early as the first quarter of 2024.
Next Wednesday, the Fed is anticipated to maintain current rates. Since March 2022, it has increased its policy rate by 525 basis points, bringing it to the current range of 5.25%–5.50%.
"We're looking for more evidence that restrictive monetary policy and tight credit conditions are having the desired effect, dampening inflationary pressures, not only in the economy more broadly, but also the labor market," said James Knightley, chief international economist at ING in New York.
"I don't think the Fed will be signaling a desire to cut on the scale that the market is looking to price right now, but they will be pretty happy with the evidence of the cooling jobs market."
According to a Reuters survey of experts, nonfarm payrolls probably grew by 180,000 jobs last month after increasing by 150,000 in October. Government data indicated that the United Auto Workers (UAW) union's approximately 25,300 members ceased their strikes against Detroit's "Big Three" automakers on October 31, which caused a decline in manufacturing payrolls for that month.
There are still at least 5,000 striking UAW workers, most of them are employed by Mack Trucks. Payrolls were probably helped by the 16,000 SAG-AFTRA actors union members who returned to work.
Even so, job growth would fall short of this year's 238,800 job monthly average. The need for labour is decreasing as the economy's overall demand is reduced by the Fed's significant rate increases.
This Monday, the government said that October had the fewest job opportunities since August 2021, with 1.34 positions available for every unemployed person.
The Fed's Beige Book report from last week described the labour market as having "continued to ease" and stated that "most districts reported flat to modest increases in overall employment" from early October through mid-November. These reports add to the anecdotal evidence of decreasing hiring.
A sign of future hiring, temporary assistance has decreased for the most part of this year. Additionally, from 34.6 hours in January to 34.3 hours in October, the average workweek has decreased. At that point in November, it should have remained unchanged.
However, not all economists concur that there is a softening of the labour market; others contend that large segments of the economy—particularly in the service sector—remain understaffed.
According to a poll conducted this week by the Institute for Supply Management, companies in the services sector reported having "issues" in November with filling open positions as a result of regular attrition. "Trying to get to full staff levels" and "the labour market remains very competitive" were two other remarks made.
"We're not convinced that the labor market has really slowed abruptly here," said Dean Maki, chief economist at Point72 Asset Management in Stamford, Connecticut. "The underlying trend in job growth remains pretty healthy."
Since April, when it was 3.4%, a 53-year low, the jobless rate has increased. On the other hand, rather than businesses firing employees, the increase has been caused by an increase in the labour supply. Although there was a chance that November's unemployment rate may reach4.0%, economists advised against reading the increase as a sign of weakening labour market conditions.
"More people are coming into the labor force, and they're counted as unemployed when they come in," said Dan North, senior economist at Allianz Trade North America. "It's not companies firing people. So, it's not the usual dynamic that would make one concerned."
The Fed is working harder to bring inflation down to its objective of 2% since the growing labour pool is reducing wage growth.
The average hourly wage is expected to increase by 0.3% following a 0.2% increase in October. This would cause the yearly pay increase to drop to 4.0%, the lowest increase since June 2021, from 4.1% in October.
Modest salary increases would complement recent data indicating October's decline in inflation.
Although that would tighten consumer spending this quarter and going forward, analysts do not anticipate a recession; rather, they see a period of muted growth. The majority did not notice job losses in the economy until the second quarter of 2024.
"We may have some quarters of virtually flat growth, overall, very very slow growth for the whole year," said North.
(Source:www.fortune.com)