Labor Market Shows Signs of Weakness, Fed Eyes 25 Basis Point Cut

•Job Growth: The U.S. added 227,000 jobs in November, marking the 47th consecutive month of positive growth. This follows a rebound from October’s weak job numbers, largely influenced by the recovery from Hurricane Helene and the end of the Boeing strike.

• Slower Pace: The three-month average for job growth has risen to 173,000, the highest since May 2024. However, this marks a slower trend compared to previous years, with job growth decelerating since early 2021.

Sector Performance:

• Manufacturing saw a boost, with 22,000 jobs added, largely due to Boeing returning workers.

• Non-cyclical sectors like education, healthcare, and government made up 64% of the year’s job growth.

• Leisure and Hospitality (mainly bars and restaurants) added 53,000 jobs, reflecting pandemic recovery.

Unemployment:

The unemployment rate ticked up slightly to 4.2% from 4.1% in October. However, the increase is modest and not yet signaling a recession, according to the Sahm Rule.

• Long-Term Unemployment: The number of long-term unemployed (27 weeks or more) rose to 1.7 million, the highest level since January 2022. This suggests that while many workers feel secure in their jobs, those who lose employment face greater difficulty in finding new work.

• Hiring Trends: The job openings rate has slowed to 3.3%, the lowest since 2014, reflecting a cooling labor market.

• Federal Reserve Outlook: The Fed is expected to reduce interest rates by 25 basis points at its December meeting, bringing the target range to 4.25% to 4.50%. While inflation remains above target, economists predict fewer rate cuts in 2025 than previously projected.

This economic data signals a softening in job growth and labor market conditions, but inflationary pressures still influence Federal Reserve decisions. Market watchers are closely monitoring the potential for a rate cut and its long-term impact on the economy.

Source: CoStar Economy, Christine Cooper & Chuck McShane