U.S. job growth is in the spotlight this week
Markets seem to be fascinated by the prospect of falling U.S. inflation, interest rate cuts by the Federal Reserve, and no recession in the future. Scott Anderson, chief U.S. economist at BMO Capital Markets, said these deals will get a real test next Friday when the Labor Department releases its November employment report.
The employment report is considered the best indicator of the overall health of the economy. In general, the labor market did not meet expectations and remained strong throughout the year. This supported incomes and consumer spending. Beneath the surface, there are signs that the strong payroll growth in the July-September quarter will not continue.
October JOLTS data
Tuesday 10:00 AM ET
In pandemic-era economies, economists have used JOLTS data (Job Search and Labor Turnover Summary Report) to measure the relative strength of the labor market. Job openings are expected to decline to 9.4 million in October from 9.6 million the previous month. In October last year, there were 10.5 million unfilled jobs. The decline in vacancies was good news for the Biden administration and the central bank. Federal Reserve President Chris Waller has argued that job vacancies can be reduced without the unemployment rate skyrocketing. Many people didn’t think it was possible.
Jobs could decline significantly in October, to 9.2 million, according to JOLTS data, said Avery Shenfeld, chief economist at CIBC Capital Markets. This may be a sign that the tightness in the labor market is easing.
November ISM Service Sector Index
Tuesday 10:00 AM ET
Economists expect services sector growth in November to rise slightly to 52.5 from 51.8 the previous month. The index continued to decline for two consecutive months, recording its weakest reading since May. Economists feared the index could slip into contraction territory below 50, where it has not declined since December 2022. A significant slowdown in services spending will lead more economists to predict a recession next year.
November jobs report
Friday 8:30 AM ET
Economists surveyed by the Wall Street Journal expected the U.S. economy to have added 190,000 jobs in November, up from 150,000 the previous month.
The unemployment rate is expected to remain stable at 3.9%.
Wages are expected to rise 0.3% in November, after rising 0.2% the previous month. However, year-on-year wage growth is expected to slow from 4.1% in October to 3.9%. This is consistent with the picture of inflation easing.
Economists said some of the strength would come from the return of striking workers.
The data may also be skewed by holiday hiring, which is expected to be weaker this year.
Richard Moody, chief economist at Regions Financial Corp., thinks higher headline wage growth will mask the cooling in labor demand.
“It is clear that the pace of job growth continues to slow, with a significant amount of noise remaining in the data. However, it is important to note that this slowdown has so far been only a function of the decline in employment. I am opposed to increasing layoff rates. If that pattern changes, it will be a most worrying signal for the broader economy,” Moody said.
