EXPLAINER: Takeaways from the November jobs report

WASHINGTON — For nearly nine months, the Federal Reserve has relentlessly raised interest rates to try to slow the U.S. job market and bring inflation under control.

And for just as long, the job market hasn’t seemed to get the message.

The November employment report the government issued Friday was no exception. Employers added 263,000 jobs — a substantial gain that was far above economists’ expectations. Wages rose robustly, too, further intensifying the inflationary pressures the Fed has been struggling to contain.

And the unemployment rate remained at 3.7%, barely above the half-century low of 3.5%.

Friday’s hiring data left economists scratching their heads over the job market’s resilience and the continuing need of many employers for more workers.

“The Fed is tightening monetary policy, but somebody forgot to tell the labor market,” said Brian Coulton, chief economist at Fitch Ratings.

The Fed’s inflation challenge began after the economy roared back from the pandemic recession two years ago, causing vast shortages of goods and sending prices soaring. After assuming — falsely — for months that high inflation would prove shortlived, the Fed finally began raising its key short-term rate in March this year.

Since then, its rate hikes have been recurrent and aggressive. The Fed has raised its benchmark rate six times, including four straight increases of three-quarters of a point — far larger than the usual quarter-point hikes. Later this month, it’s expected to raise its key rate by an additional half-point.

Because the Fed’s rate affects borrowing rates across the economy, its hikes have had the effect of making loans much costlier for consumers and businesses. The idea is that individuals and companies would then cut back on borrowing and spending, and employers would slow their hiring.

But the economy — and especially the job market — have proved surprisingly durable in the face of the Fed’s anti-inflation campaign, a fact underscored by Friday’s strong jobs numbers.

The central bank’s goal is to achieve 2% annual inflation. It has a long way to go, to say the least: The most recent inflation report showed consumer prices up 7.7% from a year earlier.

Here are some takeaways from the November jobs report:

TOO HOT FOR THE FED

Last year, the economy added a record 6.7 million jobs, and it tacked on an average of 457,000 a month more from January through July this year. Since then, hiring has cooled, to a monthly average of 277,000 from August through November. Yet it’s still running way too hot for the Fed’s inflation fighters and is consistently beating forecasters’ expectations.

With nearly two job openings for every unemployed American, companies are struggling to find workers and retain the ones they have.

RISING WAGES

Average hourly earnings rose 0.6% from October to November — the strongest month-to-month gain since January. And measured over the past 12 months, average pay was up a more-than-expected 5.1%,

Hourly pay gains were especially strong in November for workers in retail, transportation and warehousing and “information,” a category that includes some technology jobs.

HELP WANTED: RESTAURANTS AND BARS

Restaurants and bars added 62,000 jobs last month. The healthcare industry took on a net 45,000 new workers in November. That sector has been adding 47,000 jobs a month this year, up from an average of just 9,000 a month in 2021.

Factories added 14,000 jobs in November. That gain occurred even though an index issued by the Institute for Supply Management showed that U.S. manufacturing activity fell last month for the first time since May 2020, when the economy was reeling from the COVID-10 outbreak.

Last month, the economy also added 20,000 construction workers. But in a sign that higher interest rates are squeezing the housing market, the number of employees at homebuilding companies actually fell in November by 2,600.

MISSING WORKERS

The number of people who either have a job or are looking for one — the total labor force — declined by 186,000 in November. It was the third straight monthly drop.

The shortfall in available workers has been caused by a combination of early retirements, reduced immigration, COVID-19 deaths and a shortage of affordable child care.