U.S. Labor Market Continues to Cool Down in November, Striking Auto Workers Return to Work

The U.S. labor market for the second straight is showing the effects of multiple hits causing the economy to lose steam. U.S. employers added 199,000 workers in November, higher than the expected 183,000 consensus following a downwardly revised by 35,000 the advance for September and October. The UAW strikers returned, which was estimated at about 33,000 from payrolls last month. Government and health care were the source of gains. We have the unaffordability of higher borrowing costs following the Federal Reserve’s rate hiking spree, persistent inflation and war theatres in the Middle East and Ukraine. The report could lead Fed officials to extend their hiking pause.

The participation rate rose to 62.8% and the unemployment rate fell to 3.7%, pulling back from 3.9% last month which was the highest since January 2022. The higher unemployment means joblessness is close to triggering the Sahm Rule, which has proven to be reliable predictor of recessions in the past.

Working

The rule by former Federal Reserve economist Claudia Sahm posits the start of a recession when the three-month moving average of the unemployment rate rises by a half-percentage point or more relative to its low during the previous 12 months. The low was 3.4% and October was the highest in 2023 so far, following two readings at 3.8% in August and September. A rate above the 3.9% level that would trigger the Sahm Rule.

The report was stronger than the ADP Employment Report for November which showed private payrolls increased 103,000 last month and October’s reading was revised lower. The median estimate in a Bloomberg survey of economists called for 130,000. This follows posting the weakest advance in two years in September. The report is released two days ahead of the BLS employment report.

November 2023 US Employment Report

US Jobs Report

November 2023 US Employment Report and Expectations

Highlights

Employment

  • Change In Nonfarm Payrolls Nov: 199K (exp 183K; R prev 150K)
  • Unemployment Rate Nov: 3.7% (est 3.9%; prev 3.9%)
  • Labour Force Participation Rate Nov: 62.8% (est 62.7%; prev 62.7%)
  • Prior two-month net revision Oct: -101K vs +119K prior
United States Non-Farm Payrolls

The jobless rate was 3.7% in November the Labor Department reported Friday. The unemployment rate is higher than the pre-pandemic rate of 3.5%, which was a 50-year low. (This was bettered in Jan at 3.4%) The job market is still tight, with the national unemployment rate hovering near half-century lows but this is an 18-month high. The unemployment rate and number of unemployed persons prior to the coronavirus (COVID-19) pandemic was 3.5 percent and 5.7 million, respectively, in February 2020).

United States Unemployment Rate

The number of employed persons in The United States increased to 161,969,000 in November of 2023 from 161,222,000 in October of 2023.

  • US Change In Private Payrolls Nov: 150K (est 158K; prev 99K)
  • Change In Manufacturing Payrolls Nov: 28K (est 30K; prev -35K)
  • Household survey Nov: +747K vs -348K prior
  • Underemployment Rate Nov: 7.0% (prev 7.2%)
  • Birth-death adjustment Nov: +4K vs +412K prior
  • In November, the number of long-term unemployed (those jobless for 27 weeks or more) edged down
  • to 1.2 million. These individuals accounted for 18.3 percent of all unemployed persons.

Earnings

  • Avg Hourly Earnings (M/M) Nov: 0.4% (est 0.3%; prev 0.2%)
  • Avg Hourly Earnings (Y/Y) Nov: 4.0% (est 4.0%; prev 4.1%)
  • Avg Weekly Hours All Employees Nov: 34.4% (est 34.3; prev 34.3)
  • Payrolls benchmark NSA revision for 2022 was in Jan 23
  • Payroll benchmark SA 2022 was in Jan 23

Other Employment Reports for November (Via ScotiaBank)

  • Challenge layoffs are still low at 45k in November
  • initial claims were up a bit between nonfarm reference periods but only by around 10k which is negligible
  • NFIB plans to hire increased a tick, but not much
  • NFIB jobs hard to fill fell 3 points to the lowest since February 2021
  • JOLTS job vacancies fell back to 8.73 million from 9.35 million last month
  • Consumer confidence jobs plentiful increased by 1.6 points to 39.3 which conflicts with fewer openings in the JOLTS report in terms of what consumers say they observed.
  • ISM-services-employment was little changed at 50.7 from 50.2, so it only registered a mild pick-up
  • ISM-mfrg-employment fell a full point to 45.8 as mfrg employment fell at a quicker pace
  • ADP was soft at 103k. Meh. Weak connection between initial ADP and initial private nonfarm estimates.
  • There might be a positive effect from the end of strikes by the UAW and Hollywood (the Screen Actors Guild etc). BLS figures show 10,500 on strike in November, down from 48.1k in October. That said, despite what one might think, accounting for the impact of strikes on jobs data is anything but simple and the effect isn’t big enough that it would carry the day in any obvious way.
  • On wages, part of what drove the market reaction the last time around was that wage growth at 0.2% m/m SA was the softest since February 2022. Most are betting on a mild pick-up partly due to a strong holiday shopping season and the need to fill openings.

Participation

The labor force participation rate in the United States bounced back to 62.8 percent in November 2023, the highest since February 2020, when the pandemic started to hit.

United States Labor Force Participation Rate

Market Reaction (Updated at Stock market open)

  • S&P 500 (+0.3%) and Dow Jones Industrial Average (+0.2%) both trade up while the Nasdaq Composite trades flattish.
  • Market breadth is positive, but modestly. Advancers have a 4-to-3 lead over decliners at the NYSE and an 11-to-10 lead at the Nasdaq.
  • S&P 500 sector performance mixed. Five sectors trade up while six sectors trade down, but moves in either direction are relatively muted. The energy sector (+1.1%) outperforms, climbing alongside oil prices ($70.99/bbl. +1.63, +2.4%). The utilities sector (-0.4%) shows the largest decline.

Treasury yields surged higher in response.

The market was pricing in 121 basis points in Fed rate cuts next year and USD/JPY was trading at 144.35. The pricing immediately dropped to 112 basis points with USD/JPY up to 145.00.

  • Treasury yields took a sharp turn higher in response. The 10-yr note yield, at 4.18% just before 8:30 ET, went to 4.23%. The 2-yr note yield, at 4.63% just before 8:30 ET, went to 4.69%.
  • 2-yr: +14 bps to 4.71%
  • 3-yr: +14 bps to 4.46%
  • 5-yr: +13 bps to 4.24%
  • 10-yr: +11 bps to 4.24%
  • 30-yr: +8 bps to 4.32%

WSJ Fed Watcher Nick Timiraos on the jobs report:

Where the Jobs Were:

Largest gains (prior month) occurring in:

  • Health care added 77,000 jobs, driven by ambulatory health care services (+36,000), hospitals (+24,000), and nursing and residential care facilities (+17,000).
  • Government payrolls increased by 49,000, boosted by local government (+32,000) and state government (+17,000).
  • Employment in manufacturing rose by 28,000, slightly less than expected, as automobile workers returned to work following the resolution of the UAW strike.

Largest losses (prior month) occurring in:

  • Employment in retail trade declined by 38,000.

 


Household Survey Data  

The unemployment rate edged down to 3.7 percent in November, and the number of unemployed persons showed little change at 6.3 million.
Among the major worker groups, the unemployment rate for teenagers (11.4 percent) edged down in
November. The jobless rates for adult men (3.7 percent), adult women (3.1 percent), Whites (3.3
percent), Blacks (5.8 percent), Asians (3.5 percent), and Hispanics (4.6 percent) showed little or no
change over the month.
In November, the number of long-term unemployed (those jobless for 27 weeks or more) edged down
to 1.2 million. These individuals accounted for 18.3 percent of all unemployed persons.
The employment-population ratio increased by 0.3 percentage point to 60.5 percent in November. The
labor force participation rate was little changed at 62.8 percent and has been essentially flat since
August.
The number of persons employed part time for economic reasons decreased by 295,000 to 4.0 million in November. These individuals, who would have preferred full-time employment, were working part
time because their hours had been reduced or they were unable to find full-time jobs. (See table A-8.)
In November, the number of persons not in the labor force who currently want a job was 5.3 million,
little different from the prior month. These individuals were not counted as unemployed because they
were not actively looking for work during the 4 weeks preceding the survey or were unavailable to take
a job.
Among those not in the labor force who wanted a job, the number of persons marginally attached to
the labor force changed little at 1.6 million in November. These individuals wanted and were available
for work and had looked for a job sometime in the prior 12 months but had not looked for work in the 4
weeks preceding the survey. The number of discouraged workers, a subset of the marginally attached
who believed that no jobs were available for them, was 421,000 in November, essentially unchanged from the previous month.


Establishment Survey Data

Total nonfarm payroll employment increased by 199,000 in November. Employment growth is below the average monthly gain of 240,000 over the prior 12 months but is in line with job growth in recent months. In November, job gains occurred in health care and government. Employment also increased in
manufacturing, reflecting the return of workers from a strike. Employment in retail trade declined.

Private Jobs

  • In November, health care added 77,000 jobs, above the average monthly gain of 54,000 over the prior
  • 12 months. Over the month, job gains continued in ambulatory health care services (+36,000), hospitals
  • (+24,000), and nursing and residential care facilities (+17,000).
  • In November, employment in leisure and hospitality continued to trend up (+40,000), almost entirely
  • in food services and drinking places. Leisure and hospitality had added an average of 51,000 jobs per
  • month over the prior 12 months.
  • Employment in social assistance continued to trend up in November (+16,000). The industry had added
  • an average of 23,000 jobs per month over the prior 12 months. Over the month, employment continued
  • to trend up in individual and family services (+9,000).
  • Retail trade employment declined by 38,000 in November and has shown little net change over the
  • year. Employment decreased in department stores (-19,000) and in furniture, home furnishings,
  • electronics, and appliance retailers (-6,000) over the month.
  • In November, employment in information changed little (+10,000). Motion picture and sound recording
  • industries added 17,000 jobs, mostly reflecting the resolution of labor disputes in the industry. Overall,
  • employment in the information industry has declined by 104,000 since reaching a peak in November
  • Employment in transportation and warehousing changed little in November (-5,000). A job loss in
    warehousing and storage (-8,000) was partially offset by a gain in air transportation (+4,000).
    Employment in transportation and warehousing has declined by 61,000 since a peak in October 2022.
    Employment showed little change over the month in other major industries, including mining,
    quarrying, and oil and gas extraction; construction; wholesale trade; financial activities;
    professional and business services; and other services.

Government Jobs 

Government employment increased by 49,000 in November, in line with the average monthly gain of

55,000 over the prior 12 months. Employment continued to trend up in local government (+32,000) and

state government (+17,000) over the month.

United States Government Payrolls

Manufacturing Jobs

Employment in manufacturing rose by 28,000 in November, reflecting an increase of 30,000 in motor

vehicles and parts as workers returned from a strike. Employment in manufacturing has shown little net

change over the year.

Earnings

In November, average hourly earnings for all employees on private nonfarm payrolls rose by 12 cents,
or 0.4 percent, to $34.10. Over the past 12 months, average hourly earnings have increased by 4.0
percent. In November, average hourly earnings of private-sector production and nonsupervisory
employees rose by 12 cents, or 0.4 percent, to $29.30.

 Wages Monthly

Wages Yearly

The average workweek for all employees on private nonfarm payrolls edged up by 0.1 hour to 34.4
hours in November. In manufacturing, the average workweek was unchanged at 40.0 hours, and
overtime remained at 2.9 hours. The average workweek for production and nonsupervisory
employees on private nonfarm payrolls edged up by 0.1 hour to 33.8 hours.

 Hours

The change in total nonfarm payroll employment for September was revised down by 35,000, from
+297,000 to +262,000, and the change for October remained at +150,000. With these revisions,
employment in September and October combined is 35,000 lower than previously reported. (Monthly
revisions result from additional reports received from businesses and government agencies since the last
published estimates and from the recalculation of seasonal factors.



The Employment Situation for November is scheduled to be released on Friday, January 5, 2024, at 8:30 a.m. (ET).


Source: AFP, Challenger, DOL, TradersCommunity Data, BLS

From The TradersCommunity News Desk