12/2/2022: November Jobs Report Remains Strong

Unemployment rate is unchanged at 3.7%

The November jobs report is out. 263,000 jobs were added in November, and the unemployment rate was unchanged at 3.7 percent. The labor force participation rate of 62.1% was little changed from October. The labor force participation rate is still 1.3 percentage points below the value pre-pandemic in February 2020.

In November, average hourly earnings have increased by 5.1% YoY and 0.6% MoM. The same numbers for October are 4.7% YoY and 0.4% MoM. The wage growth remains strong and is well above the pre-pandemic rate of 3%. This wage growth was highlighted in Powell’s speech earlier this week as a driver for inflation. The Fed believes they need to keep the interest rate high at potentially 5+% to dampen the demand for labor and to slow down the wage growth to fight inflation.

I have repeated the same point over and over again but it appears that the real issue here is the (lack of ) supply for labor. As the labor participation rate indicates, America simply has fewer people working currently compared to before the pandemic and American employers still have a lot of unfilled open positions. The Fed can keep raising rates to kill the demand for labor but high interest rates very likely will also kill the economy. I hope they figure out a solution to balance the labor situation without killing the economy. Nobody wants the economy killed.