Total nonfarm payroll employment rose by 266,000 in November, and the unemployment rate was little changed at 3.5 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in health care and in professional and technical services. Employment rose in manufacturing, reflecting the return of workers from a strike.
What happened to the slowing economy, especially in manufacturing since last year’s sugar high from the 2017 Republican tax cuts? Manufacturing added 54,000 jobs, but it was mostly GM workers returning to work after their successful strike that gave them some of the enormous profits GM has been generating.
In fact, it was the 74,000 new jobs in Leisure and Hospitality highlighting strong consumer spending in restaurants and hotels that is sustaining economic growth.
Consumers are still optimistic, per the University of Michigan sentiment survey that rose to a preliminary December reading of 99.2 from a final November reading of 96.8. Consumers’ views on current conditions rose to 115.2 in December from 111.6 in November, while a barometer of their expectations rose to 88.9 from 87.3.
The only caveat was the slight drop in average hourly pay to 3.1 percent, down from 3.4 percent earlier in 2019. Why? It’s all the lower-paying jobs that benefit from consumer spending; like Transportation and warehousing (15.5k new jobs), and the aforementioned Leisure and Hospitality jobs.
Longer-term inflation expectations fell to 2.3 percent, matching a record low in the U. of Michigan survey. Federal Reserve policy makers watch this figure closely and have cited below-target inflation as one of the reasons behind the three interest- rate cuts this year. The Fed, which holds a meeting next week, has signaled it will keep rates on hold barring a material shift in the outlook.
There is little wage growth, and therefore little inflation, which means consumers can keep spending through the holidays. The ongoing trade wars aren’t yet boosting import prices enough that would bring on higher inflation, while energy prices have also fallen, keeping gas prices low.
These are all reasons to keep the economy afloat, with the additional caveat that importers can’t keep absorbing the tariff increases forever.
Harlan Green © 2019
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen