US job growth slowed sharply last month, raising questions about whether the Federal Reserve will pursue a more aggressive approach to scale back its stimulus package.
Employers in the world’s largest economy added just 210,000 jobs for the month, down sharply from the 546,000 jobs created in October and well below economists’ forecast of 550,000. annual earnings averaged 555,000.
Despite the slower-than-expected recovery in November, the unemployment rate fell significantly, falling 0.4 percentage points to 4.2%. Less than six months ago, it was approaching 6 percent.
Data released Friday by the Bureau of Labor Statistics also showed a modest improvement in the number of people employed or looking for work.
The so-called participation rate, which has stagnated since June 2020, climbed to 61.8% in November from 61.6% in October, but is still around 1.5 percentage points below the previous threshold. the pandemic.
Childcare issues and Covid concerns are among the most frequently cited reasons for preventing people from returning to the workforce – a dynamic that could be exacerbated by the recent emergence of the novel variant of the coronavirus Omicron.
Loretta Mester, Chairman of the Federal Reserve in Cleveland, warned of the risk in an interview with the Financial Times on Thursday. Jay Powell, president of the US central bank, also alluded to it during two days of testimony in Congress earlier this week, noting that another wave of Covid-19 could hamper progress in the labor market and worsen supply chain disruptions.
This could mean weaker job gains, a slowdown in economic activity and even greater uncertainty about inflation, which is at the fastest pace in 30 years, he said.
Employers have already had to raise wages in order to attract workers amid acute labor shortages, and the average hourly wage rose again in November.
Wages rose another 0.3 percent month-over-month, bringing the annual pace of wage growth to 4.8 percent.
The BLS noted “notable” gains in a number of industries, including 90,000 added jobs in professional and business services, 50,000 in transportation and warehousing and 62,000 in construction and manufacturing.
Employment in retail trade fell by 20,000, while employment in leisure and hospitality remained stable. Employment in this sector remains down 1.3 million since before the pandemic. Mining, commerce, and public and private education have changed little.
The latest jobs report, which showed 3.9 million more Americans are still out of work than before the pandemic, came just days after Powell made it clear that the central bank was taking a more stance. aggressive in tackling inflation, which he admitted had spread throughout the economy in recent months and raised the specter of a much more persistent problem.
Powell signaled this week that he could support the acceleration of the central bank’s withdrawal from its massive stimulus package – a process he began just weeks ago at a pace that would end the purchase. of bonds in June.
A faster exit, for which many Fed officials have expressed public support this week, is likely to mean earlier-than-expected interest rate hikes, a possibility that has rocked financial markets and prompted economists to increase their prices. betting for a rate hike next year.
Some Wall Street analysts are now expecting three interest rate hikes next year, with the first adjustment coming in May.
The market reaction to the jobs report has been muted – with US government bonds on most maturities selling modestly, indicating investor belief that weaker-than-expected gains will not change the Fed’s price too much.