Only 127 000 jobs were added in November as the US labor market begins to cool
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In collaboration with Stanford Digital Economy Lab, the private payroll firm ADP released its November National Employment Report which shows that employers added only 127,000 jobs in the last month. This number is way below the expectations of economic experts and is an indication that the labor market is finally beginning to cool.
Medium-sized employers were observed to add jobs while small and large-scale employers were seen to reduce their payroll in November 2022. Small businesses with below 19 employees contributed 5,000 new jobs to the market while those with 20 – 49 employees reduced payroll by 56,000 jobs. Mid-sized employers with 50 – 249 employees were seen to add 283,000 new jobs in November. However, employers of the same scale with 250-499 workers decline by 37,000 jobs. Large-scale employers with over 500 workers lost the largest number of jobs at 68,000.
When considering the added payroll by industry, the goods industry was led by the natural resources and mining sector, with 16,000 new jobs added. However, the construction sector lost 2,000 jobs while the manufacturing sector let go of 100,000 jobs. In the services sector, the leisure and hospitality industries added the greatest number of jobs, 224,000. The trade, transportation, and utility sector followed with 62,000 jobs and the education and health services sectors added a combined sum of 55,000 new jobs to the market. The professional and business services sector lost the most jobs, 77,000, in November. The finance industry also lost 34,000 jobs, and the information industry reduced the workforce by 25,000.
Nela Richardson, Chief Economist at ADP, said, “Turning points can be hard to capture in the labor market, but our data suggest that Federal Reserve tightening is having an impact on job creation and pay gains. In addition, companies are no longer in hyper-replacement mode,” regarding the report.
Wage gains were somewhat plateaued in November but still remains 7.6% higher than the previous year. Employers all over the states seem to be slowing down their rates of hiring new talent. According to Lightcast Senior Economist Ron Hetrick, the number of employees quitting the workforce is higher today and there is a 40% higher job openings number than the pre-pandemic numbers. The tight labor conditions are affecting management decisions everywhere, from healthcare to education.
The Federal Reserve was hoping for a cooling labor market that would take some pressure off wages and inflation. Interest rates have hiked up by 3% over the past few months. There is speculation that the interest rates will rise by another half percentage point in the time of two weeks. The considerable drop from 261,000 new jobs in October to only 127,000 in November will have its effects on the labor market.
Dan North, a senior economist at Allianz Trade North America, says that the year-on-year job growth rate has reduced to 3.3% from 4.7% in January 2022. He believes that this figure will become negative as a recession starts in the first half of 2023. The third quarter GDP was updated by the Bureau of Economic Analysis yesterday. The value increased to 2.9% from the estimated 2.6%. This difference is likely due to improved exports and consumer spending.
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