Unemployment rate rises to 4.2 percent in November as US labour force shrinks and wage growth accelerates
The United States labour market saw a significant rebound in November, following near-stagnation in October caused by major labour disruptions and severe weather.
According to CNBC, the Bureau of Labor Statistics (BLS) reported that nonfarm payrolls increased by 227,000, surpassing the Dow Jones consensus estimate of 214,000.
October’s payroll figure, previously hindered by Hurricane Milton and the Boeing strike, was revised upward to 36,000. September’s job gains were also adjusted higher to 255,000, an increase of 32,000 from initial estimates.
The US unemployment rate in November edged up to 4.2 percent, in line with expectations. This increase coincided with a 0.1 percentage point drop in the labour force participation rate to 62.5 percent, reflecting a decline of 193,000 in the labour force.
Household employment contracted by 355,000, with full-time positions decreasing by 111,000 and part-time roles dropping by 268,000. A broader unemployment measure, which includes discouraged workers and those in part-time employment for economic reasons, rose to 7.8 percent.
Among demographic groups, Black workers experienced a sharp rise in unemployment, with their rate jumping 0.7 percentage points to 6.4 percent.
Health care led job creation in November, adding 54,000 positions, followed closely by leisure and hospitality, which grew by 53,000. The government sector contributed 33,000 jobs, while social assistance added 19,000 roles.
Despite these gains, retail trade lost 28,000 jobs. Analysts attribute this decline to delayed holiday hiring due to a later-than-usual Thanksgiving.
Worker pay increased in November, with average hourly earnings rising 0.4 percent from the previous month and 4 percent on a year-over-year basis. Both figures exceeded expectations by 0.1 percentage points.
The stronger-than-anticipated wage growth supported modest gains in stock market futures, while Treasury yields fell.
The November US jobs data bolstered expectations that the Federal Reserve will lower interest rates at its December 18 meeting. Traders now see an 88 percent likelihood of a quarter-point rate reduction, according to market-implied odds.
“The economy continues to produce a healthy amount of job and income gains, but a further increase in the unemployment rate tempers some of the shine in the labour market and gives the Fed what it needs to cut rates in December,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management.
Fed Chair Jerome Powell noted earlier this week that the overall strength of the economy provides the flexibility to approach monetary policy decisions patiently.
However, other Federal Reserve officials indicated that additional rate cuts remain likely, contingent on economic conditions.
The household survey, used to calculate the unemployment rate, highlighted US labour market challenges despite the headline payroll growth.
Lindsay Rosner, head of multi-service investing at Goldman Sachs Asset Management, remarked, “Data this morning was a Thanksgiving buffet with payrolls spot on, revisions positive, but unemployment ticking higher despite the participation rate falling.”
While inflation has moderated since peaking in mid-2022, prices have recently shown upward movement.
US labour market indicators continue to reflect a mix of resilience and slowing growth, adding complexity to the Federal Reserve’s forthcoming rate decision.
