The surprisingly robust demonstration creates new questions in an already confusing situation. Economists say they are encouraged by the durability of the labor market, but fear that continued momentum – and rising wages, in particular – will keep the Fed in its quest to slow the economy for longer, thus increasing the risk of recession.
“The labor market continues to advance despite various headwinds,” said Daniel Zhao, chief economist at Glassdoor. “We’re getting mixed signals from the report – not a surprise at a time when the economy is at a crossroads – but looking back, it still points to a more resilient labor market than expected. On the other hand, inflation has also been more resilient than expected.”
The Fed has already raised interest rates six times this year — and plans to do so again in December — in hopes of slowing the economy enough to rein in rising prices. Despite these efforts, headline inflation, at 7.7%, has only slowly come down from its summer peak of 9.1%.
Policymakers are hoping to lower inflation without dragging down the economy or triggering higher unemployment.
“We’re obviously in a moment of huge risk in the economy right now,” said Adam Ozimek, chief economist at Economic Innovation Group, a nonpartisan trade organization. “You can’t rule out a recession, but the economy appears to be rebalancing towards sustainable growth.”
Stock markets slid on the news, falling sharply as markets opened before rallying around midday. The three main indexes were still down shortly before noon.
The still strong labor market continues to be one of the strongest pillars of an otherwise confusing situation economy. Americans are spending a lot, even though they are saving less than they have in 15 years. Manufacturing activity contracted in November for the first time in more than two years.
The Fed, however, remains concerned that a still hot labor market could drive up wages, which could then worsen inflation. Wage growth, which had moderated in recent months, accelerated in October and November. Fed Chairman Jerome H. Powell stressed this week that as long as inflation remains too high, wage increases for Americans will not translate into a higher standard of living.
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“Right now people’s wages are being eaten up by inflation,” Powell said at an event at the Brookings Institution on Wednesday. “But if you want to have a strong and sustainable labor market, where real wages increase across the whole wage spectrum, especially for the lower income earners, you have to have price stability. And until we get that restored, we can’t go back to that place.
The average hourly wage hit $32.82 in November, up 5.1% from a year ago, which economists say puts additional pressure on the Fed to continue to raise interest rates.
More broadly, the latest numbers show a bifurcation in hiring as Americans shift more of their spending from goods to services. Many of the largest job gains in November were concentrated in service industries, such as recreation, hospitality and health care. Meanwhile, employment fell in retail trade, transportation and warehousing as companies reduced holiday hiring.
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A separate government report earlier this week showed there were 10.3 million job vacancies in October, down from 10.7 million a month earlier.
“There is a disconnect between workers and jobs,” said Giacomo Santangelo, economist at Monster.com. “We can say that there are outlets for every unemployed person, but that does not correspond to reality. There’s a huge demand for nursing, but if you lose your job at Twitter, Meta, or Alphabet, you won’t be a nurse.
This divide is becoming increasingly clear as some companies have announced mass layoffs, while many others are struggling to find enough workers. Some of the nation’s largest employers, including Walmart, Amazon and Google, recently cut thousands of white-collar jobs. Tech companies weathered a particularly steep downturn with heavy job losses and hiring freezes, and media companies such as CNN and the Gannett newspapers announced layoffs this week. Meanwhile, employers in low-paying sectors such as education, healthcare and hospitality are reporting widespread labor shortages. (Amazon founder Jeff Bezos owns The Washington Post.)
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Roxanne Pauni, who owns a daycare center in Logan, Utah, says she has hired at least 80 people in the past two years, though she currently has only 25. She has increased her hourly wage from $9 to $15, but still struggles to find and keep employees.
“You have a few good workers here and there, but some of them only last a paycheck or two,” she said. “It’s hard to be competitive when everyone else in the area is also trying to hire.”
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