Washington, Dec. 3 (BUS): US employers likely ramped up hiring in November as they scrambled to meet strong demand for goods and services, giving the economy a boost as another challenging year drew to a close, although worker shortages remained represents a constraint. , Reuters reported.
The closely watched Labor Department employment report on Friday is expected to show a rapid tightening in the job market, with the unemployment rate dropping to a 20-month low of 4.5% and wages increasing further. It will come days after Federal Reserve Chairman Jerome Powell told lawmakers that the US central bank should consider accelerating ending its massive bond purchases at its policy meeting scheduled for December 14-15.
“Obviously there is a huge demand for workers. The bigger issue is supply to meet that demand,” said James Knightley, chief international economist at ING in New York. “If the supply does not show any meaningful increase, then that indicates that we will be in a position where the labor market will continue to increase upward inflationary pressures.”
Nonfarm payrolls likely increased by 550,000 jobs last month after rising by 531,000 in October, according to a Reuters survey of economists. That would leave employment below its peak of about 3.7 million jobs in February 2020. Estimates ranged from 306,000 to 800,000 jobs.
Strong employment gains will add to strong consumer spending and manufacturing data indicating that the economy was accelerating after picking up pace in the third quarter. They will also put an early Fed rate hike on the table. However, the alternative Omicron for COVID-19 poses a risk to the bright picture.
While not much is known about Omicron, some slowdown in employment and demand for services is likely, based on experience with Delta, which was responsible for the slowest pace of economic growth in more than a year in the last quarter.
“No company wants to hire more labor if there is no demand for that labor,” said David Wagner, portfolio manager at Aptus Capital Advisors in Cincinnati, Ohio.
For now, the stars are fully in line with the November employment report. First-time applications for unemployment benefits were close to pre-pandemic levels in mid-November. Wednesday’s ADP National Employment Report showed strong private pay growth last month.
A survey by the Institute for Supply Management showed that the measure of employment in manufacturing reached a seven-month high.
The Conference Board’s labor market differential – derived from data on consumers’ opinions of whether jobs are plentiful or hard to come by – jumped to a record high in November.
An expected drop in the unemployment rate to 4.5% from 4.6% in October will leave the unemployment rate 1.8 percentage points lower than in January. There were 10.4 million jobs at the end of September.
As the labor market tightens, companies are increasing wages. Average hourly earnings are expected to rise 0.4%, matching October’s gain. This would bring the annual wage increase to 5.0% from 4.9% in October.
But higher wages are not attracting the millions of Americans who lost their jobs during the pandemic recession into the workforce. About 3 million people remain out of the workforce as well despite generous federally funded unemployment benefits expiring in September and schools reopening for personal learning.
Economists say a strong stock market and rising home prices have increased wealth for many Americans, encouraging early retirement. Households have accumulated huge savings and there has been a rise in self-employment.
“The dismantling of the forces keeping workers out of the workforce will not happen overnight, and with a significant portion of exits concentrated among retirees, the labor market is set to remain tight,” said Sarah House, Wells Fargo’s chief economist. Charlotte, North Carolina. “Wage pressures are likely to remain high and full employment closer in sight.”
Employment gains in November are likely to be led by the leisure and hospitality businesses, following a similar pattern to October. Manufacturing likely added 45,000 jobs compared to 60,000 in October, possibly dented by the strike that has since ended at John Deere (DE.N), which involved about 10,000 workers.
A rebound is expected in government payrolls after three consecutive monthly declines. Employment fluctuations associated with the pandemic have distorted normal seasonal patterns in state and local government education. There was a shortage of bus drivers and other support staff.
“Governments generally cannot easily raise wages or offer employment bonuses to compete with private sector employers,” said Dean Baker, chief economist at the Center for Economics and Policy Research in Washington. “Over time, they can arrange for needed wage increases, which could lead to a job loss reversal in November.”
NS