Despite high inflation and a slowing economy, firms throughout the country continued to hire quickly in November, demonstrating resilience in the face of the Federal Reserve’s relentless interest rate hikes.
The labor department reported Friday that the economy added 263,000 jobs while the unemployment rate remained at 3.7%, which is still very close to a 53-year low.
Fewer jobs were added in November than in October (284,000 more).
The hiring last month represented a significant rise. America’s labor market has confounded critics all year long, adding hundreds of thousands of jobs each month despite rising prices and the Fed imposing ever-higher borrowing rates.
The strength of the hiring increase in November may prompt worries that the Fed may now need to maintain high rates even longer than many had anticipated.
The Dow Jones Industrial Average futures immediately fell by about 400 points due to the reaction on Wall Street.
Wage increases have coincided with companies’ sustained hiring. Average hourly pay increased 5.1% in November compared to last year’s, which may make the Fed’s efforts to control inflation more difficult.
In a speech this week, Fed Chair Jerome Powell emphasized that the employment and wage growth rate was too high for the government to reduce inflation quickly.
To force inflation back toward its target range, the Fed increased its benchmark rate from almost zero in March to about 4%.
Meanwhile, the economy has been driven by American households thanks to consistent jobs and rising wages.
Even after accounting for inflation, consumer spending increased steadily in October.
The number of cars, restaurant meals, and other services purchased by Americans increased.
The U.S. economy increased at a quick 2.9% annual rate last quarter after contracting in the year’s first half.
Along with consumer spending strength, a surge in exports also contributed to growth.
Even while their spending has been stimulated by consistent hiring and rising incomes, Americans use credit cards more frequently to keep up with rising costs.
Many people are also spending down their savings, a trend that cannot last forever.
In part because of people’s worries that the Fed’s escalating rate hikes will ultimately force the economy to crash, some indicators of weakness have raised anxieties about a possible recession next year.
Many businesses have announced high-profile layoffs, particularly in the media, technology, and retail sectors.
Along with digital behemoths like Amazon, Meta, and Twitter announcing job layoffs, smaller businesses like DoorDash, Redfin, Best Buy, and the Gap have also said they will lay off staff.
The manufacturing sector may be declining for the first time since May 2020, according to a measure of factory activity that fell in November.