U.S. Job Market Report – November

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job openings unexpectedly increased in November while hiring softened, suggesting the labor market continued to slow at a pace that probably does not require the Federal Reserve to rush to cut interest rates.

The Job Openings and Labor Turnover Survey (JOLTS) from the Labor Department indicates that layoffs remained low and workers were reluctant to quit their jobs.

There were 1.13 job openings for every unemployed person, up from 1.12 in October. The vacancies-to-unemployed ratio is just below its pre-COVID-19 average of 1.2, compared to 1.43 a year ago. The U.S. central bank reduced rates last month for the third straight time since easing began in September but projected fewer cuts in the near future.

> “There is no signal here of any sudden collapse of the labor market or imminent recession,” said Carl Weinberg, chief economist at High Frequency Economics. “These data indicate the economy is nearing full employment, not moving away from it. The Fed will find no reason to rush to cut rates.”

Job openings, an indicator of labor demand, rose by 259,000 to 8.098 million at the end of November. October’s data was revised to show 7.839 million vacancies instead of the previously reported 7.744 million. Economists had forecast 7.70 million unfilled positions.

The increase in job openings was broad, predominantly among small businesses. Vacancies increased by 273,000 in professional and business services, while finance and insurance saw a rise of 105,000. Private educational services added 38,000 unfilled jobs. However, the information sector reported a decrease of 89,000 vacancies. The openings rate rose to 4.8% from 4.7% in October.

Employers remained hesitant to add more workers following a hiring surge during the recovery post-pandemic. Economists speculated that businesses were awaiting clarity on policies from President-elect Donald Trump, who pledged tax cuts but also promised to impose or significantly raise tariffs and deport undocumented immigrants.

Hires dropped by 125,000 to 5.269 million, particularly affecting businesses with one to nine employees and those with 50 to 249 workers. Notable declines were seen in professional and business services as well as manufacturing hiring. The hires rate fell to 3.3% from 3.4% in October.

Job growth likely slowed in December, with an anticipated increase of 160,000 jobs after November’s surge of 227,000. The unemployment rate is forecast to remain unchanged at 4.2%.

> “Business leaders will navigate the economic environment cautiously until it becomes clear how they need to adjust their headcounts,” said Oren Klachkin, financial market economist at Nationwide.

LOW LAYOFFS
Layoffs remained stable at 1.765 million in November, though cuts surged by 102,000 in the accommodation and food services industry, contributing to a stable labor market.

Workers appear to be sticking with their jobs, with the number of quits dropping by 218,000, which is favorable for wage pressures and inflation overall. However, inflation concerns persist.

A survey from the Institute for Supply Management (ISM) reported that the prices paid for inputs by services businesses rose to nearly a two-year high in December, supporting the U.S. central bank’s projection of only two rate cuts this year instead of the previously expected four.

The Fed lowered its benchmark overnight interest rate by 25 basis points to the 4.25%-4.50% range at its recent policy meeting. The policy rate was raised by 5.25 percentage points in 2022 and 2023 to combat inflation.

Despite optimism for tax cuts and a less stringent regulatory environment, businesses reported growing concerns about tariffs. Accommodation and food service providers mentioned plans to diversify supply in response to anticipated tariffs, while construction businesses expressed hesitation regarding pricing.

In the information sector, businesses voiced concerns over tariff activity and uncertainty regarding purchasing decisions. The fears of increased tariffs likely contributed to the 3.4% jump in imports reported in November, reaching $351.6 billion. This outpaced a 2.7% increase in exports to a record high of $273.4 billion, resulting in a 6.2% widening of the trade deficit to $78.2 billion in November.

> “There is evidence that importers are bringing in more goods to stockpile before the Trump administration takes full effect,” said Christopher Rupkey, chief economist at FWDBONDS. “The Trump administration will have significant challenges if they wish to revert the U.S. back to its former manufacturing leadership.”