By Christopher Rugaber
The nation’s employers kept hiring briskly in November despite high inflation and a slow-growing economy — a sign of resilience in the face of the Federal Reserve’s aggressive interest rate hikes.
The economy added 263,000 jobs, while the unemployment rate stayed 3.7%, still near a 53-year low, the Labor Department said Friday. November’s job growth dipped only slightly from October’s 284,000 gain.
Last month’s hiring amounted to a substantial increase. All year, as inflation has surged and the Fed has imposed ever-higher borrowing rates, America’s labor market has defied skeptics, adding hundreds of thousands of jobs, month after month.
With not enough people available to fill jobs, businesses are having to offer higher pay to attract and keep workers. In November, average hourly pay jumped 5.1% compared with a year ago — a robust increase that is welcome news for workers but one that complicates the Fed’s efforts to curb inflation.
The strength of the hiring and pay gains raised immediate concerns that the Fed may now have to keep rates high even longer than many had assumed. The stock market reacted with alarm, with Dow Jones Industrial Average sinking more than 400 points as trading opened Friday.
“This will be a reminder to the Fed and to the markets that the job on inflation is not done,” said Blerina Uruci, chief U.S. economist at brokerage T. Rowe Price. “They really need wage pressures to be on a more sustained downward path. So that certainly calls for interest rates to remain higher for longer.”
The report painted a picture of a job market in which the supply of available workers is falling even though many companies are still desperate to hire to meet customer demand. The proportion of Americans who either have a job or are looking for one declined for a second straight month, to just under 60%.
This week, Fed Chair Jerome Powell stressed in a speech that jobs and wages were growing too fast for the central bank to quickly slow inflation. The Fed has jacked up its benchmark rate, from near zero in March to nearly 4%, to try to wrestle inflation back toward its 2% annual target.
More than half the job growth last month — 170,000 — came in two large industries: Education and health care, and a category made up mostly of restaurants, hotels, and entertainment firms. Both sectors are still replacing workers who were lost during the pandemic. Most other industries have surpassed their pre-pandemic levels of employment.
There were some signs of weakness in Friday’s figures: Retailers, transportation and warehousing companies all cut jobs. So did temporary staffing agencies. Temp employment, often seen as a leading indicator of hiring, has declined for three straight months.
Yet a category that includes technology workers actually added jobs, despite many recent high-profile layoff announcements from such tech companies as Amazon, Meta, Twitter and the real estate broker Redfin.
Some signs of modest cooling in the job market have emerged recently. They include a small decline in job postings and a drop in the number of people who are quitting jobs — trends that suggest some rising caution among workers.
Even so, steady hiring and rising paychecks in many industries have helped U.S. households drive the economy. In October, consumer spending rose at a healthy pace even after adjusting for inflation. Americans stepped up their purchases of cars, restaurant meals and other services.
After having contracted in the first six months of the year, the U.S. economy expanded at a brisk 2.9% annual rate last quarter. In addition to strength from consumer spending, a spike in exports helped boost growth.
Though steady hiring and rising wages have fueled their spending, Americans are also turning increasingly to credit cards to keep up with higher prices. Many are also digging into savings, a trend that cannot continue indefinitely.
Some signs of weakness have sparked concerns about a likely recession next year, in part because many fear that the Fed’s surging rate hikes will end up derailing the economy. Particularly in the technology, media and retail industries, a rising number of companies have made high-profile layoff announcements.
In addition to job cuts from tech behemoths like Amazon, Meta and Twitter, smaller companies — including DoorDash, the real estate firm Redfin and the retailers Best Buy and the Gap — have said they will lay off workers.
And in November, a measure of factory activity dropped to a level that suggested that the manufacturing sector is contracting for the first time since May 2020.