The US labor market appears to be back on track.
US employers added 266,000 jobs in November, the Labor Department reported Friday. The gains include auto workers who returned to work after a six-week strike at General Motors.
The previous two months’ job gains were also revised higher, adding an additional 41,000 jobs. The initial reading for October had showed a sharp drop in hiring, raising concerns about the continued strength of the job market.
Meanwhile, the unemployment rate fell slightly to 3.5% in November. That matches a 50-year low also reached in September of this year.
The report shows a continuation of the strong labor market of recent years. It marks the 21st straight month that the unemployment rate has been at or below 4%, a level generally considered to represent full employment. And thanks to the strong labor market, workers have been able to make some progress on wages, which are up 3.1% over the last 12 months. Annual wage increases have averaged 3% or greater every month since August 2018.
The manufacturing sector added 54,000 jobs in November, offsetting a decline in October related to nearly 50,000 General Motors workers who were then on strike.
But the job increases were widespread across the US economy. Health care had a big gain, up 45,000, as did the leisure and hospitality industry, which also added 45,000 jobs.
“This firmly helps put fears of recession in the rearview mirror,” said Michael Arone, chief investment strategist at State Street Global Advisors.
Still, the overall level of hiring so far this year is a bit slower than it was in 2018. Employers added an average of 223,000 jobs every month last year compared to only 180,000 this year. That can be because, in a hot job market, employers are having trouble finding workers they need in some areas.
Hiring has slowed in a few sectors including retail, which added only 2,000 jobs ahead of the holiday shopping season, and construction, which added only 1,000 jobs. Both those sectors have very low rates of unemployment for job seekers who most recently worked in those fields.
Sal Guatieri, senior economist at BMO Economics, attributed the pickup in hiring to easing trade tensions and strong household spending. Spending by consumers accounts for more than three quarters of US economic activity. And low unemployment and higher incomes, especially heading into the holiday season, give businesses an incentive to hire more workers. Factoring in earnings, hours and hiring, Guatieri described the November jobs report as the strongest of 2019.
“All these new jobs will only put an extra spring in the step of holiday shoppers,” he wrote in a note to clients. “If there’s any slowing, it’s partly due to labor shortages.”
Investors seemed to like the report, with US stock indexes up about 1% on the news. The strong report also means the Federal Reserve, which has cut rates three times so far this year, is likely to leave rates unchanged at its meeting next week. And despite President Donald Trump’s desire for further rate cuts, the central bank could leave rates unchanged for the foreseeable future, Guatieri said.
“A lengthy Fed hiatus seems warranted,” he added.