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The U.S. labor market demonstrated continued strength and job gains in November 2023, defying predictions of an imminent recession. Employers added 199,000 jobs during the month according to the Labor Department’s latest data. The unemployment rate also dropped to 3.7%, a historic low indicating labor demand remains robust.
However, the rate of job growth has begun moderating across most industries. Service sectors including healthcare, hospitality, entertainment and government led hiring last month. But goods-producing industries like manufacturing, construction and retail posted more modest gains or losses, likely impacted by high interest rates and inflation.
The November data does point to a ‘soft landing’ for the economy as intended by the Federal Reserve. Annual wage growth held steady at 4%—still above the Fed’s 2% target but cooling since peaking at 5.6% in early 2022. Price inflation has also eased significantly. The combination of moderate pay gains and declining consumer prices suggests policies combating inflation are working without sparking mass unemployment.
Still, forecasts predict further slowing in 2024 as consumers run down pandemic savings and spending retreats. The ADP National Employment Report showed private payrolls rose just 103,000 in November, with particular weakness in hospitality and manufacturing. Pay growth for job switchers also hit an annual low of 8.3%.
Overall the data confirms labor market resilience, though likely at a slower pace going forward. The jobless rate remains near record lows and pay is still rising faster than inflation. But certain cyclical industries are past peak growth, signaling a gradual comedown from an extraordinarily heated economy. The Federal Reserve will likely maintain interest rates through 2023 before considering cuts in 2024 to sustain the recovery.