Employers seemingly employed extra employees and boosted wages in November

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A worker moves in at the Amazon fulfillment center in Robbinsville, NJ, Jan.

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Employment growth is expected to have been strong in November and employers likely continued to raise wages to attract and retain workers in an incredibly tight labor market.

According to the Dow Jones, economists estimate 573,000 jobs were created last month, up from 531,000 in October. The unemployment rate is expected to have fallen from 4.6% to 4.5% and the average hourly wage is projected to have increased by 0.4% on a monthly basis or 5% year on year.

“It looks like it’s been a really good month, and we’ll see if we can hold it with some withdrawal, which is natural given concerns about Omicron,” said Diane Swonk, chief economist at Grant Thornton. “But right now we’re still getting off an incredible month, especially for travel and tourism.”

The job dates, expected Friday at 8:30 a.m. ET, will be an important input for the Federal Reserve at its December 14th and 15th meeting. Earlier this week, Fed chairman Jerome Powell said the central bank could accelerate the reduction in its $ 120 billion monthly bond purchase program, which it put in place to prop up the economy during the pandemic. The Fed will discuss acceleration at its December meeting, he said.

The Fed’s dual mandate

Full employment is one of the Fed’s dual mandates, so economists will monitor the participation rate closely in the November report to see if it goes up. This metric is the percentage of eligible workers who are employed or actively looking for work and was 61.6% in October.

Swonk expects 750,000 jobs to have been created above consensus in November, and she expects the unemployment rate to have fallen to 4.4%. Swonk said wage growth should be solid as employers try to attract workers given demand from Amazon and other employers who have raised wages.

“It’s a hot job market and the demand is growing like we’ve never seen it before,” she said. She found that job vacancies were up 55% from February 2020, according to the Indeed online job board.

“There is no immigration. She fell off a cliff. The pandemic has hastened retirements and affected the participation of some of the groups who normally have to attend the most, “she said. “It’s far from perfect. It’s a job market where increasing demand collides with supply bottlenecks.”

Wage increases were likely across the board in November. “We’re going to see profits at the low end, but the high end, professional services, is really hot,” said Swonk.

Luke Tilley, chief economist at Wilmington Trust, expects 300,000 jobs to be created in November based on private sector data and weekly unemployment claims data.

He believes the hiring trend is and will remain strong.

“Our expectation is 500,000 jobs per month on average over 12 months, but it will fluctuate with the virus and the ups and downs of different industries,” said Tilley.

More context behind the job report

Tilley said the Fed would look into the reasons for the weakness or strength of the job report to assess what will be normal for the job market after the pandemic. “If it is weak because there is still no labor supply, it is very different to them than weakness because the demand is falling,” he said. “I think the Fed, the FOMC, is probably spending more time hugging each other, which means a full rebound in the job market.”

He said the Fed will have to adjust to a lower participation rate. “That has an impact on the unemployment rate and we should even compare it to the pre-pandemic unemployment rate,” he said.

The job report is also judged by investors in view of its importance for Fed policy. Financial markets were sensitive to nuances that could help set the central bank’s timetable for the completion of its bond-buying program, which is now expected to end in June 2022.

Once the bond purchases are over, the door will be open to the Fed to raise interest rates.

Swonk had expected the Fed to accelerate the tapering of its bond purchases due to the unexpectedly high inflation, so the wage share will also be very important in the employment report. “We’re not getting a wage price spiral … but that’s what the Fed fears we might achieve,” she said.

David Petrosinelli, senior trader at InspereX, said the job report is unlikely to have a major impact on the market unless it is very strong or very weak.

“I think this market is a lot more focused on a stronger number, and that tells me that prices still have some headroom,” he said. Petrosinelli cited the benchmark 10-year government bond yield, which was 1.44% on Thursday afternoon. The returns move against the price.

“You can look back on last week and that was 1.70%,” he said, referring to the 10 year return. “I think that was the upper limit there. If you get a really strong number we could go right back there, albeit limited by the sideline of this new line.”

Yields fell sharply last Friday after initial reports on the Omicron variant of Covid.