U.S. employers added 263,000 jobs in November, continuing a surprisingly strong pace of expansion this year despite the Federal Reserve's efforts to put the brakes on the labor market.
The unemployment rate stayed level at 3.7%, the U.S. Bureau of Labor Statistics said Friday. Economists surveyed by data provider FactSet had predicted employers added 200,000 jobs last month.
Job growth was broad-based, with employers in health care, government and leisure and hospitality adding jobs. The information sector grew modestly, despite widespread layoffs among tech companies. While the hiring bodes well for job hunters, the stronger-than-expected report complicates the Federal Reserve's efforts to tamp the hottest inflation in four decades, raising fears of more rate hikes to come.
"Even if the central bank eases up as expected on the magnitude of rate increases, the journey likely continues in 2023 toward a higher ultimate rate destination in the pursuit of restraining inflation," said Mark Hamrick, senior economic analyst at Bankrate, in a Friday note.
Stock markets plummeted on the report, with Dow futures down by 1.2% and S&P 500 futures down 1.5%. Investors believe that too-strong hiring could encourage the Fed to raise interest rates even higher.
Staffing up to meet demand
The stronger-than-expected hiring reflects that employers are still seeking to fill roles as the labor market continues to recover from the pandemic, economists and labor experts said.
"Another strong jobs report reflects what's plain to see in the economy: more than 10 million job openings and many industries, such as health care and education, are still working to fill out their ranks to minimum, pre-pandemic levels," Robert Frick, corporate economist at Navy Federal Credit Union, said in a note.
He added, "Also, industries such as leisure and hospitality need to staff up to meet consumer demand."
Retail, transportation and trade lost jobs, reflecting a broader shift away from goods-producing sectors of the economy toward service-oriented sectors that suffered the biggest contraction in the pandemic.
Participation, or the measure of people actively working or looking for work, also dropped — a worrying trend for those who have been hoping that strong hiring would pull people off the sidelines and into the job market.
"The issue that we have is, we're not at the level, [in terms of] the actual the size of the labor force that we should be," Giacomo Santangelo, economist at the job site Monster, told CBS MoneyWatch this week before Friday's report was issued. With the population aging and immigration to the U.S. on the decline, the labor force is projected to grow at a diminished rate in the near future — keeping the job market tight.
Wage growth also surged, with average pay increasing 5.1% over the last 12 months — still below the rate of inflation, but much higher than the Federal Reserve wants to see as it tries to cool the economy.
Job growth has slowed this year, from an average of 570,000 a month in the first three months of the year to about 270,000 over the most recent three months. But the Federal Reserve is looking for a much more, as it believes that a too-tight labor market is contributing to high inflation, despite that wages are pushing up prices.
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