Getting ready for this week's jobs report
Welcome to the economic landscape.
A few employment trends mirrored themselves in the Employment Situation report, showcasing that employment growth still remains at historically high levels, albeit slowing down and now only showing a shadow of the extraordinary growth seen at the beginning of the economic recovery from the pandemic.
As per the Bureau of Labor Statistics, US employers created 150,000 jobs nettely in October, and the unemployment rate slightly increased to 3.9%.
Last month, things might have gone a similar route, but there was an additional boost due to striking auto workers and actors returning to work (US Bureau of Labor Statistics).
Economists unanimously agree that the jobs report coming out on Friday at 8:30 a.m. ET will show a job growth rate of 180,000 and the unemployment rate is expected to stay stable at 3.9% according to Refinitiv data.
"We're expecting modest growth," said Karin Kimbrough, LinkedIn's Chief Economist, talking to CNN. "If we rely on our own data, we're actually expecting something lower. Something less impressive."
Number of workers returning to work after the strike could increase
If job growth in November follows the expected pattern, the growth rate for the year will be at levels seen in the decade before the pandemic. The 10-year period between 2010 and 2019 recorded a record run of 100 consecutive months of job growth, with an average of 183,000 new jobs being created each month.
Economists forecasted 180,000 new jobs last month, but the total number of jobs fell short by 30,000.
"A part of the weakness last month might have been illusionary and simply due to the strikes", said Julia Pollak, ZipRecruiter's Chief Economist, talking to CNN.
In a remarkable show of strength, the United Auto Workers union went on strike against the three major auto manufacturers – Ford, General Motors, and Stellantis – from mid-September to late October.
The October Jobs Report showed that the automotive and parts industry lost 33,200 jobs. The BLS attributed this decrease to strike activities; the strike report for the month showed 25,300 workers at Ford, General Motors, and Stellantis going on strike.
The November's strike report of the Bureau of Labor Statistics showed that the strike by 16,000 SAG-AFTRA actors ended when the Screen Actors Guild and Hollywood studios reached an agreement at the beginning of the previous month.
The report coming out on Friday could shed more light on whether the labor market is heading towards a more balanced and stable state, or if it's cooling down faster than anticipated. Wednesday's private job report from ADP showed a net gain of 103,000 jobs and slower wage growth, with the total falling short of the expected 130,000.
Pollack said to CNN that while the important employment and unemployment numbers coming out on Friday, along with wage growth estimates, will attract a lot of attention, data revisions can also be quite informative.
"The employment numbers were revised down about 30,000 positions on average over the past ten months", she said. "If there are more downward revisions, a lot of people are going to conclude that the labor market is weaker than initially perceived and is cooling down faster."
There was no increase in layoffs and the number of people filing for unemployment benefits has risen
Even though employment growth remains historically strong, layoffs aren't going to increase substantially, although they will still be higher than during the past decade.
According to data released by Challenger, Gray & Christmas on Thursday, US employers announced the elimination of 45,510 jobs in November. This is a 24% increase from October, but 41% lower than the number in the same period the previous year, when technology companies started trimming jobs amid their expansion during the pandemic.
Challenger Report has shown that employers have announced cutting 686,860 jobs so far this year. Excluding 2020, this is the highest total number of layoffs in the first eleven months since 2009, when 1,240,000 layoffs were announced.
Moreover, the Labor Department's data shows that people are staying out of work for longer, despite the number of new claims for unemployment benefits remaining low.
The latest weekly data on unemployment benefits will be released on Thursday morning.
Waiting for the Report
Even though the US job market is currently entering a phase of more modest growth, it is on the way to eventually recovering.
"This will be partly due to high interest rates", said Pollack, pointing out the impact of monetary policy tightening aimed at combating inflation. "Talk to any real estate investor and they will tell you that they can't build homes because of high credit costs and low property valuations … Talk to manufacturers and despite all incentives, hiring isn't really picking up because of enormous cost for factories."
Many investments will only realize their potential once interest rates fall, she said. The Federal Reserve has, in its months-long battle against "inflation," raised interest rates to the highest level since 19 years.
"Employers are hoping and expecting that business activity in the second half of 2024 will pick up", she added. "The implicit assumption is that inflation will continue to fall and the Fed will be in a position to start cutting interest rates."
