The US labor market is forecast to cool with rising interest rates last month.
The Labor Department is set to release its monthly jobs report for November at 8:30 a.m. ET on Friday. Here are Wall Street’s expectations for the report, according to Bloomberg:
Off-farm wages: +200,000 and +261,000 expected in October
Unemployment rate: 3.7% expected in October 3.7%
Average monthly hourly earnings: +0.3% expected in October +0.3%
Average annual hourly earnings: Expected in October +4.6% +4.7%
If the numbers are in line with forecasts, the estimated print would mark the lowest monthly reading in the non-farm payrolls report since April 2021. However, pre-pandemic levels averaged 150,000 to 200,000 jobs added or created per month. a healthy picture of labor conditions based on historical trends.
A cooling of employment data in November would be a welcome sign for Federal Reserve officials, who are trying to clamp down on an unusually tight labor market that has put upward pressure on wages and contributed to rising prices.
Although Federal Reserve Chairman Jerome Powell signaled on Wednesday that the pace and scale of hikes will slow later this month, Friday’s figure will not be enough to dissuade policymakers from continuing to raise interest rates further to curb inflation.
“Price stability is the responsibility of the Federal Reserve and serves as the cornerstone of our economy,” Powell said earlier this week in a speech at the Brookings Institution in Washington. “In particular, without price stability, we will not be able to achieve a sustained cycle of strong labor market conditions that benefit everyone.”
The latest data showed signs of a job slowdown – most notably in the ADP personal payrolls report released on Wednesday. The release, which serves as an imperfect proxy for official government figures, showed that private companies added 127,000 jobs in November, about half the previous month’s number and down from 190,000.
Ian Shefferson, chief economist at Pantheon Macroeconomics, questioned the reliability of the ADP data, especially after the company revised its methodology for compiling the numbers. Shepherdson claims Friday’s payroll figure will be around 250,000.
“We are deeply skeptical of the ADP employment report, which does a great job of generating uncritical media coverage for ADP, but is probably not a reliable predictor of the official payrolls numbers,” he said. It also notes that its measure lowered the August estimate by 123,000, September by 80,000 and October by 6,000, with a three-month average of -66,000 of error.
Corporate America has seen companies announce massive layoffs, particularly in the tech sector, which has struggled with severe cost overruns during the post-pandemic boom.
“Layoffs in the tech sector have grabbed a lot of headlines over the past few months, but that hasn’t yet translated into a clearly weaker job picture,” said Brendan Murphy, head of North America Global Fixed Income Investments at Insight.
Speaking at the Dealbook Summit in New York on Wednesday, Treasury Secretary Janet Yellen called the Labor Department’s monthly employment report the most important data point officials watch, along with inflation numbers.
“We don’t want to exceed full employment and we have an inflation problem,” Yellen said. “So you would expect growth to slow down, and it has – we continue to grow and have positive growth, but it has slowed significantly.”
Yellen argued that tech layoff announcements were the exception, citing “special factors” facing the sector, including a slowing economy and declining advertising revenue.
“What you’re seeing is some writing about future growth, which is causing firms to really rethink the people they need to hire, so we’ve seen job starts soften a bit,” Yellen said. While the Fed is trying to cut jobs, he did not believe significant layoffs would be necessary.
Alexandra Semenova is a correspondent for Yahoo Finance. Follow him on Twitter @alexandraandnyc
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