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Economic Preview: U.S. likely added 200,000 jobs in November, fewest in two years

Businesses are filling fewer open jobs and inflation has started to wane, but not fast enough for the Federal Reserve. The central bank wants the labor market to chill even faster to help keep inflation in check.

Here’s what to watch in the November employment report on Friday morning:

Wall Street forecast

The U.S. likely added 200,000 new jobs in November, compared to 261,000 in the prior month, according to a poll of economists by The Wall Street Journal.

An increase of that size would be the smallest since the end of 2020, but it would still to be too much for the Fed.

Chairman Jerome Powell suggested in a speech on Wednesday the economy only needs to add around 100,000 new jobs a month to soak up all the new workers entering the labor force.

By that measure, the current pace of hiring is far too strong. It’s adding upward pressure on wages and contributing to persistently high inflation.

Worker pay

The tightest labor market in decades has also fueled the biggest increase in wages in decades.

Average hourly wages have jumped 4.7% in the past year. The Fed wants to see wage growth slow toward pre-pandemic levels of 2% to 3% to help bring inflation down.

“To be clear, strong wage growth is a good thing,” Powell said in a speech to the Brookings Institution. “But for wage growth to be sustainable, it needs to be consistent with 2% inflation.”

Economists forecast a 0.3% gain in hourly wages in November. That would lower the yearly increase to 4.6%.

The increase in pay has slowed a bit since peaking at a 5.6% rate in the spring

Unemployment rate

Wall Street


predicts the unemployment rate will stay at 3.7% for the second month in a row.

The jobless rate remains close to a 50-year low and gives a good idea of just how tight the labor market is.

Expect unemployment to climb, however, as rising interest rates orchestrated by the Fed slow the economy and spawn more layoffs.

The Fed previously predicted the jobless rate would rise to 4.4% by next year, but now some senior officials say it could rise closer to 5%.

Labor force

The share of the working-age population in the labor force has stagnated at around 62%. That means just 62 of every 100 people 16 or older are either working or looking for work.

Yet this so-called participation rate is still more than a point below the pre-pandemic peak and underscores the lack of available workers.

Powell said the U.S. is missing as many as 3.5 million workers, including up to 2 million who retired and haven’t come back.

Covid-related deaths and falling immigration likely account for the remaining 1.5 million gap, he estimated.

Fed reaction

Senior Fed officials are unlikely to take much comfort in the November jobs report. While the labor market is cooling, it isn’t cooling fast enough to bring down wages and help the Fed in its fight against inflation.

“The labor market … shows only tentative signs of rebalancing, and wage growthremains well above levels that would be consistent with 2% inflation over time,” Powell said.

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