U.S. Added 155,000 Jobs in November; Unemployment at 3.7%

Posted December 7, 2018 10:37 a.m. EST
Updated December 7, 2018 10:42 a.m. EST

The Labor Department released its monthly hiring and unemployment figures for November on Friday morning, providing one of the better snapshots of the state of the American economy.

The Numbers

— 155,000 jobs were added last month. Economists had expected a gain of about 190,000. The monthly average for September, October and November was 170,000.

— The unemployment rate remained 3.7 percent.

— Average hourly earnings rose 0.2 percent after growing by 0.2 percent in October. The year-over-year gain remained 3.1 percent.

The Takeaway

After a week when the stock market suffered from motion sickness and presidential tweets caused trade tensions to flare, a weaker-than-expected jobs report may have disappointed some quarters. But faulty forecasts do not mean that the labor market has suddenly stalled. For the 98th month in a row, employers increased payrolls and monthly job gains are still averaging above 200,000 this year.

“It’s obviously an economy that is well in expansion mode but that is coming off the boil after a strong second and third quarter,” said David Donabedian, chief investment officer of CIBC Private Wealth Management. “So the state of the job market is good. It’s just that the pace of job creation is slowing a little bit.”

Yearly wage growth remained at 3.1 percent for the second month in a row, a level not seen since the recession. “If you have solid wage growth while productivity is improving, that is the best of both worlds,” Donabedian said.

Friday’s report is unlikely to discourage policymakers at the Federal Reserve from raising benchmark interest rates when they meet Dec. 18 and 19.

Nonetheless, the report is being seen as a warning flag on some fronts.

The recent volatility in the stock market and an increase in the monthly average number of people applying for unemployment benefits has worried people, said Chris Rupkey, chief financial economist at MUFG.

General Motors said last month that it would idle five plants and cut about 14,000 jobs in North America in part because of a slowdown in auto sales. In October, Ford announced plans to trim its workforce.

Still, Rupkey labeled the report “pretty darn good” and said it should help calm the markets.

Uncertainty about trade policy is the primary source of anxiety.

“The ball is in the president’s court to make sure the China deal is still on,” he said. “That is the biggest impediment now.”

In the meantime, the labor market is mostly delivering. The unemployment rate and new claims for jobless benefits are at or near record lows. And the average monthly increase in payrolls this year is more than enough to keep the jobless rate below 4 percent.

“People who are working in finance are looking at the stock market,” said Martha Gimbel, research director at the job search site Indeed. “The typical worker just wants to find a good job with hours and rising wages.”

That search has been getting easier and easier.

Gimbel said sectors that have had a particularly hard time hiring — like nursing and retailing — are now posting more full-time than part-time jobs, a sign that employers are struggling to find workers.

“Even now,” she added, “at this point in the recovery, one of the fastest-growing jobs search terms on Indeed is people looking for ‘full-time work.'”

The labor shortage has also finally started benefiting workers who were hit hardest during the recession: minimum-wage earners, African-Americans, Latinos and Americans with fewer skills and less education.

Gartner, a research and consulting firm that conducts a quarterly survey of 20,000 employees at companies valued at $100 million or more, found that most workers were extremely optimistic about their ability to find new jobs.

At the same time, years of sluggish wage growth and fewer opportunities for advancement have made some workers dissatisfied with their current employers.

“Employees who say they are willing to go above and beyond at work has declined,” said Brian Kropp, vice president for human resources at Gartner. One out of four employees used to say they were giving their work an extra oomph — something Gartner calls “discretionary effort.” Now, it’s closer to one in six.

The reason, Kropp said, is simple: Workers are not being rewarded for their efforts.

“One of the things we’ve seen is that it’s harder for employees to get promoted nowadays,” he said. In 2006, for example, it took an average of about 2 1/2 years to get a promotion, compared with 4 1/2 years today.

Fears about changing jobs have also eased, he said. Workers are more willing to take the risk of hopping to another employer in search of better compensation.

Manufacturing: A Bright Spot, for Now

Some of the strongest gains to payrolls this year have been in manufacturing — long a buttress of middle-class employment. In November, manufacturers added 27,000 jobs. That comes on top of the nearly 300,000 positions created in the previous 12 months.

The scarcity of people with the training and skills to work in some factories has been a challenge, though.

At Western Building Products’ banana-shaped factory on the lip of the Menomonee River outside of Milwaukee, workers unloaded pallets of door jambs from a large white container truck this week. Elsewhere, employees sanded down doors that hung back-to-back on a moving conveyor belt, a scaled-down, less colorful version of Disney’s animated “Monsters, Inc.” factory.

“If someone is here a year, they never leave,” said Mark Willey, president of Western, an employee-owned millwork. “Our problem today is just finding people who want to work, to show up on time and are willing to apply themselves.”

The company has 217 people on staff and expects to raise the total to 230 next year.

The average worker earns $16.95 an hour, Willey said, and gets a generous benefits package. Because the business is 100 percent employee-owned, workers build up equity in the company after a year.

Western has used temporary agencies after failing to get enough applicants on its own, and employed inmates at a nearby correctional facility as part of a work-release program. “When they get released, we hire them,” he said. “Some we even hire while they’re still in.”

This has been a good year and the company is scouting locations to build a new factory, but Willey expects business to cool over the next couple of years. The shortage of competent workers, not only at factories like Western’s but also in construction, is slowing single-family home building at the same time that tariffs have bumped up the cost of materials, he said.

He pointed to the aluminum sills that ran along the bottom of doors and the steel hinges bolted onto the sides.

The Commerce Department recently reported that construction of single-family homes fell for the second month in a row in October.

Manufacturing and related sectors tend to be more susceptible to economic cycles and are particularly vulnerable to tariffs.

Rupkey of MUFG said that manufacturing had been one of the economy’s strongest segments in recent years.

“You wonder how long that’s going to continue,” he said, referring to Trump’s trade policies.

The Federal Reserve

Most analysts expect the central bank to raise its benchmark interest rates by a quarter-point, to a range of 2.25 to 2.5 percent. It would be the fourth rate increase this year.

But they cautioned that it did increase the likelihood that the Fed would take a more cautious approach next year, following through on its announcements to be more “data dependent” and look at the numbers as they come as opposed to following a preset course.

Snowstorms in the Midwest and raging wildfires in California may have distorted employment data in November. Last month’s figures will be revised twice.