Job market conditions were generally solid again in November as the economy produced 178,000 new jobs, in line with expectations for 180,000. September and October payrolls were revised modestly downward, trimming 2,000 from previously reported estimates. The net impact is that total payrolls as of the end of November was roughly in line with projections.
Perhaps the most surprising development was the sharp decline in the unemployment rate, which fell to 4.6% — a nine-year low. Economists had expected it to remain steady at 4.9%. Positive job creation certainly contributed to that drop, but unanticipated declines in the civilian labor force and the labor force participation rate reduced the estimated rolls of the unemployed by 387,000. It’s quite likely that both of those factors will move higher in the coming months. As such, it’s possible that the jobless rate could edge higher in the coming months – even if the recent trend in job creation remains positive – before resuming its downward trend.
Yesterday’s weekly report on jobless claims pointed to a slight uptick in layoffs, as initial claims increased to 268,000 for the week ended November 28, moderately above consensus expectations. However, the picture is still positive, as the report marked the 91st consecutive week of claims below 300,000, the longest such streak in over four decades.
As the jobs market continued to move towards full employment, wage growth had shown some signs of accelerating in recent months. That didn’t hold true in November, as both average hourly and weekly earnings took a step backward. Over the past year, average hourly earnings have increased by 2.5%, as compared to 2.8% a month ago. Again, this is likely to be a temporary setback, as further tightening in labor market conditions should increase competition for skilled labor and support stronger wage growth.
The bottom line is that employment conditions remain largely constructive as the economic expansion continues to support solid job creation. The story on wages appears to be one of “two steps forward, one step back”, but there are plenty of reasons to believe that an increasingly competitive labor market should drive stronger gains for workers over time.