The Labor Department reported that the U.S. economy added 263,000 jobs in November which was better than analysts' consensus expectations of 200,000 jobs added. Estimates for the unemployment rate were in line with expectations at 3.7%, while average hourly earnings came in much hotter than expected at 0.6% vs 0.3% monthly and 5.1% vs 4.6% on an annual basis.
On Wall Street, stocks were initially lower following the report especially given that curbing wage inflation is one of the Federal Reserve's primary metrics when it comes to cooling off inflation. However, stocks managed to finish green on the day as they continue to process the Fed acknowledging the need to slow its pace of hikes and even potentially pause given signs of growing financial and economic stress.
Treasury yields were also higher as continued strength in wages implies a tighter Fed for longer. As a result, the 10-year yield hit a high of 3.66% but ended up giving back the bulk of its gains to close at its lows. It's an indication that investors are willing to look past this 'soft' print.
Overall, the report continues to support the notion that a 'soft landing' may indeed be possible given that the Fed's rate hiking cycle seems to be nearing an end, while the economy remains resilient. It also raises the question of how responsive the real economy is to monetary policy as this would mark the first time that the economy could evade a recession with such a tightening of policy.
The biggest contributors to employment growth continue to be leisure and hospitality which added 88,000 positions. Other gainers included healthcare with 45,000, government with 42,000, and services which saw an increase of 24,000. Overall, gains were widespread which is another indication of labor market resilience.
Some of the parts of the economy which saw job losses were 30,000 in retail and 15,000 in transportation and warehousing. Both aren't exactly surprising given what we are hearing from recent earnings reports from retailers and the weakness in freight rates.
For 2022, we are averaging about 392,000 new jobs per month which is a slight dropoff from the average of 562,000 new jobs added in 2021 per month. We also continue to have a 'hot' labor market as evidenced by wages and the fact that there are 1.7 job openings for every available worker.