The economy added 227,000 jobs in November, and the unemployment rate rose a tenth of a percentage point to 4.2%, the Bureau of Labor Statistics reported Friday.
Investors expected roughly 202,000 new jobs and the unemployment rate to rise slightly to 4.2%.
The interpretation
“I think, all in all, from what I’ve seen, it’s kind of a spot-on, middle-of-the-road, just-as-expected [report],” Dan North, a senior economist with Allianz Trade Americas, told the Washington Examiner. “Nothing exciting. The 12,000 was revised up a little bit from last month.”
What it means … for Trump
This is the first jobs report since President-elect Donald Trump won the election. October’s jobs report, the last before the election, showed job growth nearly stalling out, with just 12,000 jobs in the month.
This month’s positive jobs growth is welcome news for Trump, who will now be the face of the economy. Trump will hope to continue the job growth notched under President Joe Biden. In fact, there has not been a monthly decline in jobs in four years.
In the coming year, Democrats will expectedly seize on any weakness in the labor market and attempt to blame it on Trump. Conversely, Trump will tout employment gains as proof that his presidency has been a boon for the economy.
What it means for … the Fed
While positive, overall job growth has been slowing over the past year. If the labor market starts to sputter meaningfully and even turn negative, it could force the Federal Reserve, which is just now starting to dial back interest rates, to cut rates at an even more aggressive pace to shore up the economy.
After a long period of very high interest rates designed to quash inflation, the Fed finally cut its target interest rate in September by half a percentage point, a large rate cut by historical standards.
The Fed then cut interest rates again in November but by a quarter of a percentage point. The Fed will next meet later this month, and most investors expect the central bank to cut rates again. But inflation has remained stubbornly sticky and once again trended up in October. The inflation prints for November will be a major factor in whether the Fed cuts again this month or holds rates steady.
The underlying reality
November’s report suggested the labor market is still chugging along. It is welcome news after the very disappointing employment numbers from October, which were also affected by damage from hurricanes and a strike at Boeing.
Trump will enter office with a resilient, although slowing, labor market.
It is helpful to look at the overall trend for the labor market. The three-month moving average of job gains rose in November to 173,000, above the rate needed to keep up with population growth.
Roughly 112,000 new payroll jobs are needed each month to keep unemployment from rising, according to the Federal Reserve Bank of Atlanta. Note, though, that a separate estimate that takes into account the full extent of recent immigration puts the number as high as 200,000.
Prime-age employment, relative to the overall population, is strong by historical standards.
Recession watch
The unemployment rate, taken from the jobs report’s household survey, is still low by historical standards. It rose slightly in November after gradually creeping up over the past year.
Recessions entail a rising unemployment rate.
Friday’s data suggest that the U.S. labor market no longer triggers one major recession indicator — namely, when the three-month moving average of the unemployment rate rises half a percentage point relative to its minimum point over the past year. This indicator, known as the Sahm Rule, signaled the start of all postwar recessions.
The indicator had been triggered in recent months but is no longer signaling a recession.
Industries to watch
The leisure and hospitality sector in the past few months has finally exceeded the employment levels it reached in February 2020, right before restaurants and bars were forced to shut down across the country.
Construction employment has remained robust, even as the housing market has taken a massive hit over the past few years, as mortgage rates have soared alongside the Fed’s rate hikes. That’s in part because of a huge backlog of construction of multifamily housing over the past year. Economists will watch closely for any sign of slowing hiring in construction.
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Unemployment rates by race and ethnicity
The household survey also includes unemployment rates by race and ethnicity. Rates for all groups neared record lows in the past few years. After drifting up in recent months, unemployment rates held steady for white workers but rose for black and Hispanic workers in November. The jobless rate for Asian workers fell.
