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US jobs data will show whether labour market recovery is back on track

The US economy is expected to record another strong month of job gains for November as economists search for signs that the labour market recovery is regaining its momentum.

Employers in the world’s largest economy are expected to have added 546,000 jobs for the month, according to a consensus forecast compiled by Bloomberg, a slight acceleration from the 531,000 positions created in October. Since the start of the year, monthly gains have averaged 582,000.

Economists anticipate the unemployment rate will have fallen 0.1 percentage points to 4.5 per cent. Less than six months ago, it hovered closer to 6 per cent.

But the data, which will be released by the Bureau of Labor Statistics at 8.30am US eastern time on Friday, are expected to show little improvement in the number of people employed or looking for a job.

The so-called labour force participation rate, which has stagnated since June 2020, is pencilled in at 61.7 per cent for November, a marginal improvement from October’s 61.6 per cent, but about 1.5 percentage points lower than the pre-pandemic threshold.

Childcare issues and Covid-related concerns are among the reasons most often cited for holding back people from returning to the workforce — a dynamic that could be exacerbated by the recent emergence of the new Omicron coronavirus variant.

Jay Powell, chair of the Federal Reserve, alluded to this risk during two days of congressional testimony this week, noting another Covid-19 wave could impede progress in the labour market and worsen supply-chain disruptions.

That could mean more muted employment gains, slower economic activity and even greater uncertainty about inflation, which is running at the fastest pace in 30 years, he said.

Employers have already had to raise wages in order to attract workers amid what has become an acute labour shortage, and average hourly earnings are again expected to have increased in November.

Another 0.4 per cent month-over-month increase is expected, which would bring the annual pace of wage growth to 5 per cent.

The latest jobs report comes just days after Powell made clear the central bank is assuming a more aggressive stance to combat inflation, which he acknowledged had broadened throughout the economy in recent months and raised the spectre of a much more persistent problem.

Powell signalled this week that he may support speeding up the central bank’s withdrawal of its enormous stimulus programme — a process it began just a few weeks ago at a pace that would end bond-buying altogether in June.

A faster exit, which many Fed officials now publicly support, is likely to mean earlier-than-expected interest rate increases, a possibility that jolted financial markets and prompted economists to ratchet up their bets for a rate rise next year.

Some Wall Street analysts now expect three interest rate increases next year, with the first adjustment coming as early as May.


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