Within a month, the US economy has turned the corner after the weakened jobs report for October that contained not one, but two hurricanes and a major strike that laid off 33,000 workers from Boeing, and while economists felt that was an aberration, Fridays report from the US Labor Dept. showed a healthy rebound to 227,000 non farm jobs, exceeding what most predicted to be at best, 200,000; but, the great news was that wages increased to 4 percent, and again exceeded inflation at 2.8 percent.
For those that have been watching the dial on the Federal Reserve, two things are apparent: one, that another interest rate cut is on the horizon, and two, the soft landing for the economy that critics derided, has seemingly come to fruition.
Leading the job gains are health care and education at 79,000, 33,000 for government and 26,000 in the catch all of business services that have given a push to those related services.
Labor Force Participation remained the same at 83.5 percent, with a slight drop from two months ago when it was 85 percent,
Unemployment showed an acceptable 4.2 percent, slightly higher than what was thought to be 4.1 percent, but does fit well with expectations of a slow down hiring, and some observers seeing this as somewhat inevitable.
“RSM chief economist Joe Brusuelas told Yahoo Finance that Friday's report reflects a "remarkably calm labor market" that is at full employment after accounting for October's distortions.”
That presages what most are seeing as positive gains after the October aberration.
One cloud over a calm sea was that retail hiring slipped to 28,000, that some are credited to online sales which have remained strong, even after the pandemic, but others note Marketplace are attributing this to the rise in automation, which on one hand has made life easier, and more productive for workers, but on the other, decreased the need for more workers, both behind and in front of the curtain, as anyone who shops the big box stores know, where there is one central checkout for several departments, and in one in which human is present there are the self checkout lanes, and even though derided by some Wal Mart shoppers does get you in and out of the store on a busy Saturday.
Returning to the Federal Reserve, Yahoo Finance also reported that,“Entering the print, markets were widely expecting the Federal Reserve to cut interest rates by a quarter of a percentage point in December. As of Friday morning, markets are pricing in a nearly 87% chance the Fed cuts rates in December, up from a 66% chance seen a week ago, per the CME FedWatch Tool.”
"For the Fed, these numbers are going to be right in the spot of what they were looking for and they're comfortable with continuing easing policy at least at the December meeting," Citi senior global economist Robert Sockin told them. "This doesn't change the narrative that likely rates are restrictive and they have to at least come down a bit more at a gradual pace."
This may be good news for home buyers who have faced lowered mortgage interest rates. Zillow has noted that the 30 year fixed rate has ratcheted down by five basis points to 6.24; and, if the December 18 meeting of the Fed shows another interest rate decrease, things can look up for homeowners.
An oft quoted rule is that mortgage rates decrease with a strong economy and decrease with a weekend one, and they are already showing signs of trending downward.
While the overall report has been greeted warmly, there are some that are sending a cautionary note, especially regarding unemployment and the November unemployment figure of 4.2 percent, and CNN reported: “However, the unemployment rate ticked up last month to 4.2% from 4.1%, and a growing number of jobless Americans are taking longer to find a job — a reflection of a pullback in hiring. People are staying unemployed, on average, for 23.7 weeks (more than five months), the highest duration since April 2022, according to data released Friday.”
“The labor market is healthy even though it is, in the long term, trending in an unhealthy direction,” Noah Yosif, chief economist for the American Staffing Association, told CNN in an interview Friday. “What we’re seeing is really a K-shaped duality of outcomes for the labor market: It’s good if you have a job, but it’s very, very difficult if you don’t have a job.”
Layoffs have been mild in comparison and taking a wide range look, we can see that, “With November’s gains, the US has added jobs for 47 consecutive months, making it the third-longest period of employment expansion on record.”
There is conconcer that if the declines increase a snowball effect could take hold. But, of course, much depends on the incoming Trump administration and what changes the president could implement, especially with control of the White House and both the Senate and the House.
The pending deportations of illegal immigrants, in whatever shape, or form could greatly affect the economy, especially in construction, where nearly one thirds of laborers are possible illegal immigrants, not to mention farm workers, long a haven for undocumented workers.
The elephant in the room are the proposed tariffs of 25 percent, on Canada, Mexico, and even higher for China, and has been widely reported have a detrimental effect on the US economy, and consumer buying which is the bedrock of the American economy.
Suggestions that these are negotiating tools for Trump are, at this point speculation, but definitely a cause for concern. If the so-called DOGE efforts at reducing government waste, a laudable goal, but if it includes layoffs, those could have a detrimental effect on national employment.
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