Strong Job Gains and Mediocre Wage Growth Continue

By Ben Sirois, Economist, Dodge Data & Analytics

BEDFORD - December 8, 2017 - Nonfarm payrolls exceeded consensus predictions last month with broad gains across industries. A seasonally adjusted 228,000 jobs were added in November, comfortably above the 195,000 predicted in a Bloomberg poll of economists. This gain came in well above the 2017 monthly average, indicating that the job market remains strong. Revisions for the previous two months were essentially a wash, job gains for September were revised upward by 20,000 and October payrolls were adjusted down by 17,000, adding a net of 3,000 jobs in revisions to the past two months and smoothing out some of the effects of hurricanes Harvey and Irma. With November’s data, the 2017 year-to-date average sits at 174,000, slightly lower than the 2016 average of 187,000 per month. The unemployment rate remained at 4.1% and labor force participation held steady at 62.7%, following a significant 0.4-point decrease in October.

The private sector added 221,000 jobs in November, led by a notable increase in education and health services (+54,000), professional and business services (+46,000), trade, transportation & utilities (+32,000) and manufacturing (+31,000). Construction payrolls also had a strong month, adding 24,000 in November, led by specialty trade contractors (+22,600). Residential and non-residential builders saw modest gains of 5,400 and 4,100 respectively while heavy/civil engineering payrolls saw a moderate decline of 7,800. The public sector added 7,000 jobs in November with state and local governments posting gains of 1,000 and 9,000 respectively, while federal employment fell by 3,000.

Headline wage growth continued its subdued trend, increasing 2.5% year on year in November, less than the 2.7% projection. Wage growth and labor force participation continue to disappoint in otherwise strong monthly labor market reports. Explanations for this disparity range from continued market slack due to a sizeable number of discouraged workers who may or may not re-enter the workforce, to the advent of the “gig-economy” causing disruptions in traditional labor markets, to globalization making American workers compete more directly with foreign counterparts instead of just domestically. Whatever the reason, or combination of reasons, the U.S. labor market remains strong but seems to have more room to improve even with a headline unemployment rate of 4.1%. Federal Reserve Chairwoman Janet Yellen suggests that a fully healed labor market would be reflected in 3-4% wage growth, a good bit above the persistent mid-2% we’ve seen over past couple years.

In general, the data in the September and October jobs reports were muddied by the effects of natural disasters, so November was the first “clean” jobs report since August. As expected, the paltry employment numbers for September, as well as October’s rebound, seem to be more one-time events reflecting the impact of Hurricanes Harvey and Irma. Steady and moderate payroll growth is expected to continue for at least the near term.

Next month’s Beyond the Data Jobs Report will be a more extensive end-of-year recap and will include an extensive review of the labor market with analysis of underlying trends and what to expect in 2018.



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