The latest US payroll report was chock full of good news in every area except on the wage growth front. In November nonfarm payrolls increased by 266,000 compared to an October gain of 156,000 and a September increase of 193,000.

The November payroll gain was much stronger than October’s, partly because the General Motors strike ended. Indeed, the end of the GM strike had a big effect in the November jobs surge, since it boosted employment in motor vehicles and parts by 41,300, part of the overall increase of 54,000 in manufacturing.

As well, we learned from the household survey that the unemployment rate slipped marginally lower to 3.5% in November versus 3.6% in October. The broader U6 unemployment rate, which accounts for both unemployed and underemployed workers, was 6.9% in November, also slightly improved over the October figure.

In November, average hourly earnings rose 0.2% and over the last twelve months increased only 3.1%, a bit lower than the 3.2% rise estimated as of October.  

As one of the accompanying charts illustrate, the labor force participation rate slipped slightly to 63.2% in November versus 63.3% in October. Nonetheless, US labor force participation inched up through most of the spring and fall, as many more women entered the labor force. In a tight labor market, new entrants are very important for sustainable job growth.

Overall, the surprisingly strong surge in payrolls in November tends to boost the optimists about the US economic outlook. The spike in nonfarm payrolls together with the drop in the unemployment rate is very encouraging. Nevertheless, the puzzle remains as to why the wage sector continues to be so slow.

Despite a record-low unemployment rate, money wage increases still remain stubbornly slow at 3.1%, and a glance at one of the accompanying charts indicates that year-over-year wage growth has dropped in recent months.

In sum, the unemployment rate is at a 50-year low and wages are increasing, albeit at a frustratingly slow pace. The November jobs surge was very broadly based and even coincided with a slight drop in the labor force participation. 

While US business owners may be getting more cautious due to trade and political uncertainty and worries about slower economic growth, nonetheless consumer spending is still supporting the strong jobs market. In other words, both consumer and business sentiment continue to be relatively strong and are generally supportive of a US economic soft-landing next year.

 It is hard to see, with the unemployment rate at this historically low point, that a recession is just around the corner.

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Recent US Job Market Indicators

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