Snapback Snapback http://www.georgiaprime.com/ga/static/images/ga/ga-logo-amp.png http://www.georgiaprime.com/ga/daf\images\insights\article\jobs-newspaper-magnifying-glass-small.jpg December 9 2024 December 6 2024

Snapback

Labor market rebounds from October weather and strikes.
Published December 6 2024

Bottom line

Nonfarm payrolls rose by a stronger-than-expected 227,000 jobs in November (consensus at 220,000, Federated Hermes at 247,000), with a combined upward revision of 56,000 jobs in September and October. This adjusted gain of 283,000 jobs represents a solid rebound from the storm- and strike-related air pocket the labor market experienced in October, when it posted an adjusted loss of 100,000 jobs.

But there were also pockets of weakness in this morning’s report. Household employment lost a sizable number of jobs for the second consecutive month, the unemployment rate rose to 4.2%, and retailers shed jobs for the second consecutive month amid the critically important holiday shopping season. Consequently, we still expect the Federal Reserve to cut interest by another quarter point at their upcoming policy-setting meeting on December 18.

Wage inflation remains a problem Wage growth remains hot, rising by a stronger-than-expected 0.4% month-over-month (m/m) in November (which annualizes to 4.8%) and by an eight-month high of 4.0% year-over-year (y/y). The Fed is targeting 3%. Moreover, average weekly hours worked ticked up to 34.3 in November, up from a 10-month low of 34.2 in October. Each addition of 0.1 hour worked is the equivalent of adding an estimated 350,000 jobs to the economy. 

Reversal of the impact of storms and strikes The labor market was severely distorted in October by powerful hurricanes Helene and Milton that hit the Southeast. The Bureau of Labor Statistics reported that its response rate for the October jobs survey was roughly half the normal rate and was the lowest level since 1991. More than 512,000 people in nonagricultural jobs couldn’t work that month (compared with the historical average for October of 56,000). Exacerbating the situation were two significant strikes. About 45,000 dock workers at all East Coast and Gulf ports staged a walk-out in early October. That ended shortly with both sides agreeing to a three-month cooling-off period. But that expires January 15, at which point they may strike again. Boeing has since settled its October strike with 33,000 machinists. It appeared to us that October’s dismal labor-market performance would be revised up sharply in coming months, which it has.

Other important labor-market indicators mixed:

  • ADP private payroll survey November added a roughly in line 146,000 jobs (consensus at 150,000), down from a six-month high of 184,000 jobs in October. Workers who changed jobs last month saw their wages rise by 7.2% y/y, which is stronger than 6.7% gains in each of the two previous months, but down from a cycle peak of 16.4% in June 2022. Job stayers in November earned a modest 4.8% y/y gain, which was a tick stronger than September and October, but down from a peak of 7.8% in September 2022. 
  • Initial weekly jobless claims This high-frequency leading employment indicator declined to 215,000 for the November survey week that ended November 16, a seven-month low. 
  • Challenger, Gray & Christmas Employers announced layoffs of 57,727 in November, an increase of nearly 27% from a year ago, though only 3.8% higher than October. More than a third of last month’s announcements were in automotive and technology. 
  • Job Openings & Labor Turnover Survey (JOLTS) October job openings rose by 5% m/m to 7.74 million, up from 7.37 million in September, their lowest level since January 2021. But they were still 36% below a record 12.182 million job openings in March 2022. The rate of job openings rose to 4.6% in October, up from a four-year low of 4.4% in September, which is still down from a record 7.4% in March 2022. The ratio of available job openings for every unemployed worker rose in October to 1.1, up from a more than three-year low of 1.08 in September, but still down from a peak of 2.0 in March 2022.

Unemployment and labor impairment rates rise, while participation rate falls Household employment (an important leading employment indicator) lost 355,000 jobs in November, after losing 368,000 jobs in October, but gaining 430,000 jobs in September. As a result, the number of unemployed people rose by 161,000 in November and by 150,000 in October, after declining by 281,000 in September and 48,000 in August. So, the unemployment rate rose to 4.2% in November, up from 4.1% in September and October. That’s just under July’s three-year high of 4.3% and well above April 2023’s 53-year low of 3.4%.

The labor impairment rate also ticked up to 7.8% in November, up from 7.7% in each of the two previous months. But that’s just below its three-year high of 7.9% in August and well above the cycle low (dating back to 1994) of 6.5% in December 2022. 

The civilian labor force declined by 193,000 workers in November, after falling by 220,000 workers in October and adding 150,000 in September. Consequently, the participation rate declined to 62.5% in November, down from 62.6% in October and 62.7% over the three prior months. That compares with a post-pandemic high of 62.8% in November 2023 and a pre-pandemic cycle high of 63.3% in February 2020.

K-shaped recovery gap narrows The unemployment rate for highly educated workers slipped to 2.4% in November from 2.5% in October, up from September 2022’s cycle low of 1.8%. The unemployment rate for less-educated workers declined sharply to 6.0% in November, down from 6.6% in October and 7.1% in August. But that’s still well above its 31-year low of 4.4% in November 2022. 

Sector details:

  • Temporary help (an important leading employment indicator) gained 2,000 jobs in November for the second time in the past three months, after losing jobs 29 times out of the previous 32 months. 
  • Manufacturing added a weaker-than-expected 22,000 jobs in November (consensus at 30,000), but that was much better than the job losses this sector posted in four of the previous five months.
  • Construction added 10,000 jobs in November, up from 2,000 in October, compared with stronger gains of 26,000 in September and 28,000 in August.
  • Retail lost jobs for the fifth time in the past six months, losing 28,000 jobs in November and 4,000 in October, which mark the start of the important Christmas season. 
  • Leisure & hospitality rebounded strongly, adding 53,000 jobs in November, after adding a muted 2,000 workers in October but a robust 61,000 in September. 

Connect with Phil on LinkedIn

Tags Markets/Economy . Equity .
DISCLOSURES

Views are as of the date above and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector.

The Job Openings and Labor Turnover Survey (JOLTS) is conducted monthly by the U.S. Bureau of Labor Statistics.

The value of investments and income from them may go down as well as up, and you may not get back the original amount invested. Past performance is not a reliable indicator of future results. 

This is a marketing communication. The views and opinions contained herein are as of the date indicated above, are those of author(s) noted above, and may not necessarily represent views expressed or reflected in other communications, strategies or products. These views are as of the date indicated above and are subject to change based on market conditions and other factors. The information herein is believed to be reliable, but Federated Hermes and its subsidiaries do not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This material is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. This document has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. 

This document is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities, related financial instruments or advisory services. Figures, unless otherwise indicated, are sourced from Federated Hermes. Federated Hermes has attempted to ensure the accuracy of the data it is reporting, however, it makes no representations or warranties, expressed or implied, as to the accuracy or completeness of the information reported. The data contained in this document is for informational purposes only, and should not be relied upon to make investment decisions. 

Federated Hermes shall not be liable for any loss or damage resulting from the use of any information contained on this document. This document is not investment research and is available to any investment firm wishing to receive it. The distribution of the information contained in this document in certain jurisdictions may be restricted and, accordingly, persons into whose possession this document comes are required to make themselves aware of and to observe such restrictions. 

United Kingdom: For Professional investors only. Distributed in the UK by Hermes Investment Management Limited (“HIML”) which is authorised and regulated by the Financial Conduct Authority. Registered address: Sixth Floor, 150 Cheapside, London EC2V 6ET. HIML is also a registered investment adviser with the United States Securities and Exchange Commission (“SEC”).

European Union: For Professional investors only. Distributed in the EU by Hermes Fund Managers Ireland Limited which is authorised and regulated by the Central Bank of Ireland. Registered address: 7/8 Upper Mount Street, Dublin 2, Ireland, DO2 FT59. 

Australia: This document is for Wholesale Investors only. Distributed by Federated Investors Australia Services Ltd. ACN 161 230 637 (FIAS). HIML does not hold an Australian financial services licence (AFS licence) under the Corporations Act 2001 (Cth) ("Corporations Act"). HIML operates under the relevant class order relief from the Australian Securities and Investments Commission (ASIC) while FIAS holds an AFS licence (Licence Number - 433831).

Japan: This document is for Professional Investors only. Distributed in Japan by Federated Hermes Japan Ltd which is registered as a Financial Instruments Business Operator in Japan (Registration Number: Director General of the Kanto Local Finance Bureau (Kinsho) No. 3327), and conducting the Investment Advisory and Agency Business as defined in Article 28 (3) of the Financial Instruments and Exchange Act (“FIEA”). 

Singapore: This document is for Accredited and Institutional Investors only. Distributed in Singapore by Hermes GPE (Singapore) Pte. Ltd (“HGPE Singapore”). HGPE Singapore is regulated by the Monetary Authority of Singapore. 

United States: This information is being provided by Federated Hermes, Inc., Federated Advisory Services Company, Federated Equity Management Company of Pennsylvania, and Federated Investment Management Company, at address 1001 Liberty Avenue, Pittsburgh, PA 15222-3779, Federated Global Investment Management Corp. at address 101 Park Avenue, Suite 4100, New York, New York 10178-0002, and MDT Advisers at address 125 High Street Oliver Street Tower, 21st Floor Boston, Massachusetts 02110.

Issued and approved by Federated Advisory Services Company

3699349281