The U.S. economy added 199,000 jobs in the month of November, according to newly released government data. It’s a tightening labor market, with rising wages, inflation, and government spending as big factors.
Sean Higgins, CEI Research Fellow:
November’s gain of 199,000 jobs, while marginally above expectations, was well below the monthly average of 240,000 for the last year. The slowing rate of hiring is a natural reaction to the fact that the cost of labor has risen. Wages have gone up by 4 percent over the last year, and that is still not enough to force up the worker participation rate, which has been flat since August. On top of that, the spike in worker strikes is forcing wages up higher, 12 cents in November alone. Even non-union companies have to offer higher rates to be competitive. It is unsurprising that in such an environment, employers would pull back on hiring and seek to use automation or other methods that use fewer workers to get by.
Ryan Young, CEI Senior Economist:
The labor market is tightening in part because at some point it has to. Unemployment has been below four percent for a while now. The labor force participation rate, at 62.8 percent, has been back to its pre-pandemic range since this summer. Real wages are going up. And yet, jobs are still growing at an annualized pace of about 2.4 million people.
That’s about 1.4 percent labor force growth, which is almost triple America’s 0.5 percent overall population growth. While nobody knows exactly what the natural rate of unemployment is, we’re likely close to it.
Last quarter’s 5 percent growth will likely be closer to 1 or 2 percent this quarter. Growth might be slow next year as the bills for pandemic stimulus come due. Higher interest rates are part of this price and are affecting housing, autos, and other industries. But the overall picture is better than one would expect for an economy coming off a pandemic and 40-year highs in inflation.