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Jobs Report: What to Watch For Job Growth Signals Robust Economy, With Gain of 228,000
(35 minutes later)
The Labor Department will release its official hiring and unemployment figures for November at 8:30 a.m. on Friday, providing the latest snapshot of the American economy. The Labor Department released its official hiring and unemployment figures for November on Friday morning, providing the latest snapshot of the American economy.
■ Wall Street economists surveyed by Bloomberg expect the report to show that employers added about 200,000 jobs in November, down a bit from October’s 261,000 but still a strong number. • 228,000 jobs were added last month. Wall Street economists had expected an increase of about 200,000, according to Bloomberg.
■ Don’t be surprised — or alarmed — if the unemployment rate ticked up in November. In October, the rate fell to 4.1 percent, the lowest since 2000. That decline was driven in part by people leaving the labor force; Friday’s report could show that pattern reversing. • The unemployment rate was 4.1 percent, unchanged from October, when it was the lowest since 2000.
■ Economists think hourly earnings most likely rebounded in November after falling slightly in October. The September and October figures will be revised. • Average earnings rose by 5 cents an hour and are up 2.5 percent over the past year.
The American job market is the strongest it’s been in a decade, and arguably the strongest since 2000. If Friday’s report comes in as expected, the United States will have added jobs for 86 consecutive months and have an unemployment rate lower than it ever got in the last boom, which ended when the housing bubble burst. The American job market is the strongest it’s been in a decade, and arguably the strongest since 2000. The United States has now added jobs for 86 consecutive months — a downward blip in September was later revised to show a small gain — and the unemployment rate is lower than it ever got during the last boom, which ended when the housing bubble burst. Even wage growth, long the weak spot in an otherwise strong recovery, is showing signs of picking up.
Now congressional Republicans are on the verge of passing a $1.5 trillion tax cut plan, which President Trump could sign into law this month. Economists expect the bill to provide at least a modest lift to the economy — but they aren’t sure that’s a good idea. With unemployment so low and the economy fundamentally healthy, a tax cut could lead the economy to overheat, pushing up inflation and forcing policy makers at the Federal Reserve to raise interest rates faster than planned. “It’s a really, really strong economy,” said Tom Gimbel, chief executive of LaSalle Network, a staffing firm in Chicago. “Companies really want to take advantage of the economy, so they want to hire and get while the getting’s good.”
The latest batch of strong numbers come as congressional Republicans are on the verge of passing a $1.5 trillion tax cut plan, which President Trump could sign into law this month. Economists expect the bill to provide at least a modest lift to the economy — but they aren’t sure that’s a good idea. With unemployment so low and the economy fundamentally healthy, a tax cut could lead the economy to overheat, pushing up inflation and forcing policymakers at the Federal Reserve to raise interest rates faster than planned.
“It’s a very poorly timed fiscal stimulus,” said Joseph Song, an economist at Bank of America. “It kind of raises the risk of a boom-bust cycle.”“It’s a very poorly timed fiscal stimulus,” said Joseph Song, an economist at Bank of America. “It kind of raises the risk of a boom-bust cycle.”
Perhaps the biggest question is what Friday’s report will reveal about paychecks. Wage growth has long been the weak spot in an otherwise strong recovery, and the October jobs report held to that pattern: Average hourly earnings rose just 2.4 percent from a year earlier, barely enough to keep up with inflation. Job growth has gradually slowed since 2014, when the American economy added close to three million jobs. But hiring remains remarkably steady. Employers are on track to add about two million jobs in 2017, a solid pace eight years into an economic expansion. The hurricanes that hit Texas and Florida in September led to a brief slowdown, but hiring quickly bounced back.
Economists aren’t sure how long the growth can continue. The unemployment rate is approaching the level many economists consider “full employment” — the point at which essentially everyone who wants a job can find one. But the unemployment rate may not fully reflect the number of available workers. The labor force participation rate — the share of adults working or actively seeking work — has been edging up in recent years, a slight dip in October notwithstanding. That suggests that a wealth of job opportunities could be drawing people into the work force.
“I think there is a bit more slack to be burnt off,” Mr. Song said. “There are still people on the sidelines that are looking to come back to the labor market.”
Many companies, however, report that hiring is getting harder. Michael Big, who runs a small general contractor in the Chicago area, said his company had turned away projects in recent months because he can’t find enough workers.
“Unfortunately we don’t have the labor to take all the projects that are coming in,” Mr. Big said. His competitors are having the same problem, he added. “We’re all grumbling and complaining about the same thing, when we’re not poaching guys from each other.”
Mr. Big’s experience raises a question: If workers are so hard to find, why aren’t companies raising pay? In his case, Mr. Big says that in order to pay more, he would have to charge his customers more, and if he does that, he’ll be outbid by his competitors.
“The labor is there, but they’re not skilled enough for the wages they’re asking,” Mr. Big said. He said construction workers without special skills were asking $15 an hour, well above the roughly $12 an hour he can afford.
The slow pace of wage growth has been a mystery in recent months. The increase in average hourly earnings is barely enough to keep up with inflation.
Most economists expect wage growth to pick up as the unemployment rate falls. Other measures of earnings have already shown modestly faster gains, and there are signs that businesses are feeling pressure to raise pay. For the first time in six years, chief executives surveyed by the Business Roundtable, a coalition of big corporations, reported that labor expenses were their biggest cost pressure in the fourth quarter.Most economists expect wage growth to pick up as the unemployment rate falls. Other measures of earnings have already shown modestly faster gains, and there are signs that businesses are feeling pressure to raise pay. For the first time in six years, chief executives surveyed by the Business Roundtable, a coalition of big corporations, reported that labor expenses were their biggest cost pressure in the fourth quarter.
“With the unemployment rate this low and with just not enough people coming back into the work force to fill positions, firms are having to resort to offering higher wages,” said Joseph Brusuelas, chief economist of RSM, a financial consulting firm.“With the unemployment rate this low and with just not enough people coming back into the work force to fill positions, firms are having to resort to offering higher wages,” said Joseph Brusuelas, chief economist of RSM, a financial consulting firm.
Then again, economists have been predicting faster wage growth for months or even years, and it has yet to materialize. Friday’s report suggests that the holiday shopping season is off to a solid start. Retailers have struggled for much of the year as they fight off competition from Amazon and other online retailers. But the sector added nearly 19,000 jobs in November, the most in over a year. (The numbers are adjusted for seasonal patterns.)
Friday’s report will give the first glimpse of hiring in the holiday season. It could be a complicated picture. Most economists expect a strong holiday shopping season, and preliminary data suggests that Black Friday shoppers spent more this year than last. But brick-and-mortar retailers have been cutting jobs through most of the year, and holiday hiring will most likely be slower than in past years as more Americans do their shopping online. The rise of e-commerce has also created jobs in warehouses and at delivery services such as FedEx and United Parcel Service, which recently warned of delays because of the volume of online shopping. The transportation and warehousing sector added 10,500 jobs in November, continuing a year of strong gains.
On the other hand, the rise of e-commerce has also created jobs in warehouses and at delivery services such as FedEx and United Parcel Service, which recently warned of delays because of the volume of online orders.
“We are seeing a lot of jobs being created in e-commerce,” said Catherine Barrera, chief economist of the online job site ZipRecruiter. “Amazon is hiring like crazy.”“We are seeing a lot of jobs being created in e-commerce,” said Catherine Barrera, chief economist of the online job site ZipRecruiter. “Amazon is hiring like crazy.”
Policy makers at the Federal Reserve have sent clear signals that they plan to raise the benchmark interest rate at their meeting next week. The jobs report would probably have to be catastrophic to change that. Policymakers at the Federal Reserve have sent clear signals that they plan to raise the benchmark interest rate at their meeting next week. It would probably have taken a nearly catastrophic jobs report to change that — and Friday’s report was far from catastrophic.
Friday’s report could, however, affect the Fed’s plans for next year. Economists expect the Fed to raise rates three times in 2018. But if the unemployment rate continues to fall — and especially if wages start to rise more quickly — Fed officials could feel pressure to raise rates faster to head off inflation.Friday’s report could, however, affect the Fed’s plans for next year. Economists expect the Fed to raise rates three times in 2018. But if the unemployment rate continues to fall — and especially if wages start to rise more quickly — Fed officials could feel pressure to raise rates faster to head off inflation.
The report could also have political implications. Mr. Trump has frequently cited strong jobs numbers as evidence that his economic policies are working. Most economists are skeptical that presidents have much influence over the economy. But with Mr. Trump nearing the end of his first year in office, the report could take on symbolic importance.The report could also have political implications. Mr. Trump has frequently cited strong jobs numbers as evidence that his economic policies are working. Most economists are skeptical that presidents have much influence over the economy. But with Mr. Trump nearing the end of his first year in office, the report could take on symbolic importance.