The U.S economy added 263,000 jobs in November, the 23rd consecutive monthly increase, according to the Labor Department’s monthly report released Friday.
According to the report, the unemployment rate held at 3.7%, while hourly wages inched higher than expected.
Month-over-month, wages increased by 0.6%, beating expectations of a 0.3% increase. Year-over-year, wages increased by 5.1%, beating the forecast of 4.6%.
Stocks futures tumbled on Wall Street due, in part, to stronger than expected wage growth.
First American Financial Corp. Deputy Chief Economist Odeta Kushi said Friday the resilient labor market will complicate the Federal Reserve’s decision on the pace of future rate hikes.
“Elevated service-sector inflation could develop into a wage-price war spiral,” Kushi said. “Approaching December’s (Federal Open Market Committee) meeting, Fed officials will likely be paying close attention to trends in wage growth and service-sector inflation."
Kushi added that the report shows that labor supply as measured by the labor force participation rate has stalled, and even reversed slightly, while wage growth remains strong. “The Fed is hoping that slowing wage growth will make its job easier, but this report is discouraging,” she said.
Mortgage Bankers Association Senior Vice President and Chief Economist Mike Fratantoni said Friday that despite the better-than-expected report, his organization is holding to its forecast of a recession in the U.S. in the first half of 2023
“While the payroll survey showed a slower pace of growth, the household survey again showed an outright decline in employment — with a drop of 138,000 in November,” Fratantoni said. “With other data showing declines in job openings and increases in announced layoffs, we do expect further weakening ahead, with the unemployment rate likely to reach 5.5 percent by the end of 2023.”
Fratantoni added that even though wage growth picked up in November, it still remains below the pace of inflation, making it increasingly difficult for households to manage higher costs.
A weakening job market, Fratantoni said, will eventually be a negative for the housing market as it reduces demand.
“However, reaching the Federal Reserve’s goal of reducing inflation will be a benefit to those still in a position to buy a home, as it will bring down mortgage rates and improve affordability,” he said.
