The pace of U.S. job growth is expected to have slowed again in November, another sign that demand for new workers is slowing amid the Federal Reserve’s historic efforts to cool the economy.
Nonfarm payrolls are expected to have risen by 200,000 last month, according to a consensus forecast compiled by Bloomberg, down from October’s jump of 261,000 and September’s rise of 315,000. Prior to the November release, the US economy had added 407,000 jobs each month on average this year, up from 562,000 per month in 2021.
The unemployment rate should remain stable at 3.7%.
The new data, to be released by the Bureau of Labor Statistics at 8:30 a.m. ET on Friday, comes as the U.S. central bank attempts to rein in economic activity by rapidly raising borrowing costs in a bid to tame inflation. which is still close to multi-decade highs.
Consumer demand began to calm, the housing sector weakened and the technology sector suffered a wave of job cuts. However, the economy as a whole has shown surprising resilience, despite the Fed’s benchmark policy rate now nearing 4%.
In December, the central bank is expected to end its streak of 0.75 percentage point rate hikes and move to a half-point hike, although it ultimately targets an interest rate level higher than scheduled for next year. Many officials have signaled that the benchmark policy rate could eventually reach 5%.
In remarks this week, Chairman Jay Powell said the need for higher rates stems from the fact that the Fed has seen “only tentative signs of moderating labor demand.” Although the number of vacancies has fallen since its peak, it still remains historically high.
Powell added that monthly job growth also remains far too high, citing estimates suggesting the pace needs to be 100,000 a month just to keep up with population growth.
Fed officials are primarily concerned about wage growth and its effect on price pressures, given that it far exceeds what is needed for inflation to return to the 2% target of the Fed.
The average hourly wage in November is expected to have risen another 0.3%, a monthly pace slightly lower than the previous period, but equivalent to an annual jump of 4.6%.
Many sectors remain hampered by labor shortages, driving up wages as companies try to attract new hires. In November, the so-called labor force participation rate, which tracks the share of workers employed or looking for work, is expected to remain stuck below pre-pandemic levels at 62.3%. Labor supply is being held back by a flood of early retirements and a slowdown in immigration.
Cleveland Fed President Loretta Mester recently told the Financial Times that a reduced supply of workers will likely mean the central bank will have to do more to reduce demand for new hires, suggesting job losses on the horizon. .
Economists expect the jobless rate to top 5% next year as the Fed holds rates at a level that will dampen growth.