The November 2018 jobs report was substantially weaker than economists had been expecting
Washington (AFP) - Job creation slowed unexpectedly in the United States last month as the service sector added fewer workers, but the unemployment rate held steady at a 49-year low, the government reported Friday.
The new numbers fell below recent trends, denying President Donald Trump a dose of rosy news as fears mount that growth in the world’s largest economy has peaked.
Hiring fell to 155,000 net new positions in November while the gain in October was revised down to 237,000, the Labor Department reported.
But the jobless rate did not budge, holding at 3.7 percent for the third consecutive month, and hourly wages continued to outpace inflation.
The November result was substantially weaker than the 189,000 new jobs economists had been expecting to see and also fell short of average gains recorded over the last year.
While the report contained some good news for workers, worries that the current pace of economic growth may not be sustainable has rattled markets in recent weeks.
The Federal Reserve has offered some relief by signaling it will consider slowing the pace of interest rates next year – but November’s strong wage gains and low unemployment could add to the case for continuing to tighten monetary policy.
Still, investors initially greeted the news warmly, with stocks opening higher, but Wall Street quickly turned lower in late morning trade.
Average hourly earnings rose 3.1 percent as compared with November 2017, matching the pace recorded in October, which had been the strongest increase in nearly a decade.
But consumer inflation only rose 2.5 percent in that period, giving workers some increased spending power.
Hiring fell in the auto industry, a sector in which major US manufacturers are now increasing layoffs, as well as in hospitality and leisure, along with professional and information services.
Hiring at the federal and local government levels also slowed for the second month in a row.
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Ahead of the crucial holiday season, hiring by major retailers reversed some of the declines of recent months, adding 18,000 new positions – but this was partially offset by losses in stores selling clothing and electronics, as well as outlets for sporting goods and books.
“All these components are very noisy month-to-month and we see no sign of softening trends,” Ian Shepherdson of Pantheon Macroeconomics wrote in a client note.
At the current rate, unemployment is likely to continue to fall, reaching as little as three percent by the end of next year, he said.
“No one at the Fed thinks that’s sustainable.”
Shepherdson also said Friday’s report showed little sign that weaker job growth was due to Trump’s trade war as employment rose in the trade-sensitive manufacturing sector.
The labor force participation rate – a measure of people either working or looking for work – held steady at 62.9 percent, the same level as the month Trump took office in January 2017.
After a year of robust growth, economists say the effect of last year’s Republican-driven tax cuts and recent fiscal stimulus is beginning to fade, creating worries about how much longer the current economic expansion can continue.
While markets still expect the Fed to raise benchmark lending rates later this month, the weaker-than-expected November jobs report “might have an influence” on the Fed’s forecasts for the number of rate hikes it expects next year, according to RDQ Economics.
The economic analysis firm said in a client note that, should a single policymaker on the Fed’s rate-setting committee take a softer stance, the median forecast for 2019 would then switch from three to two increases.