Jobs Report Indicates a ‘Good Underlying Economy’

The U.S. economy added a solid 227,000 jobs in November, and the unemployment rate rose slightly to 4.2%, the latter figure increasing the odds of another interest rate cut that the marine industry and boat buyers would welcome when the Federal Reserve’s policymaking committee meets at mid-month.

“Broadly looking at November’s job report, this is another strong month showing growth in jobs and wages, indicating a good underlying economy,” Chad Lyon, managing director, global inventory finance, at Wells Fargo, told Trade Only Today. “Even the uptick in the unemployment rate was attributable to a reduction in the labor force participation. Additionally, last month’s report was revised up slightly, and first-time jobless claims reported Thursday remain low. For the recreational marine industry, this is good news — generally speaking, it illustrates a significant look for the U.S. economy as everyone’s closing out 2024 and preparing for 2025.”

“It was a steady-as-she-goes jobs report, with the exception of the unemployment rate ticking up to 4.2%,” Ian Wyatt, director of economics at recreational marine lender Huntington Commercial Bank, told Trade Only Today. “The 227,000 jobs added were highly concentrated in the sectors that have driven growth over the last year: leisure and hospitality, restaurants, government and social assistance. I would have preferred a wider range of sectors driving growth, but this trend is not new.

“Manufacturing added 22,000 jobs, though the entire gain is explained by the end of the Boeing strike, and a decent portion of the gains in other sectors were a rebound following the hurricanes that hurt employment in October,” Wyatt added. “When we remove the noise from hurricanes and strikes, overall job growth may be averaging under 150,000 a month now — an OK but not great level.

“There were some things I really liked in the report,” he said. “Professional and business services added 26,000 jobs, which included a slight gain in temporary-help services. This sector has struggled over the past year, and temporary-help employment was up slightly over the last month — a reversal compared to the 140,000 temporary-help jobs lost over the past year.”

The Labor Department’s November report again had good news for wages, as average hourly earnings rose by 13 cents, or 0.4%, to $35.61, matching the percentage rate of the increases for the previous three months.

During the past 12 months, workers’ earnings have increased by 4%, remaining well above the current rate of inflation. That level of pay hikes continues to support solid growth in consumer spending, which rose in October by 0.4% after climbing by an upwardly revised 0.6% in September.

Separately, the Commerce Department confirmed in late November that the U.S. economy grew at a strong 2.8% pace in the third quarter.

“Construction jobs are proving resilient to interest rates, as manufacturing and infrastructure investments offset more rate-sensitive categories of construction,” Wyatt says. “From a consumer spending standpoint, wages growing by 0.4% over the past month and 4% over the past year is a very good sign, particularly in an economy where inflation is well under 3% and sets the stage for a still-confident consumer to keep spending into 2025.”

Wyatt said the jobless-rate increase in the November report makes another Fed rate cut at its Dec. 17-18 meeting more probable.

“Given the Fed’s focus on the unemployment rate, the tick up in the unemployment rate increases the odds of a rate cut in December, and both short-term and long-term bond yields fell on the report because the market saw this report as supportive of rate cuts,” he said.

“The odds of a Fed rate cut in December rose, and there is only one major data release before the Fed’s December meeting — the Consumer Price Index,” Wyatt added. “While inflation has looked a little stickier and been a little hotter than the Fed would like in recent months, I don’t think there would be enough data in that CPI release to prevent the Fed from cutting in December. The big question is not so much December, but does the Fed hit pause in January?

“For the boating industry, the combination of slightly lower long-term rates lowering the cost of financing and a continued rally in stocks making many upper-income consumers feel wealthier should be a positive sign for the sales outlook,” he said.

“In talking with colleagues across industries, it feels like the general consensus is the Fed will lower rates this month,” Lyon said. “The reasoning is since real interest rates are still above neutral and policy is restrictive, this offers room for the Federal Reserve to lower rates while still monitoring inflation. The next key report to keep an eye out for is CPI, which comes out Dec. 12, as that will show the direction of inflation, which after declining for 18 months has remained flat the past few months. Many believe this report will have some impact on the Fed’s December decision and on policy going into 2025.”

Lyon said Wells Fargo heard that the results were good for the marine industry at the Fort Lauderdale International Boat Show, “with many customers reporting increasing unit sales from the show year-over-year. We have also observed an increase in our floorplan payoffs since the show, when compared to last year. This is a positive sign for the consumer and for the recreational marine industry.”

The consensus forecast of economists was that the economy would add about 200,000 jobs in November.

The government revised upward its job totals for September and October by a total of 56,000. The September increase was bumped up by 32,000, to 255,000, and the disappointing October gain was upgraded by 24,000, to 36,000.

The government said health care was again the category leader, adding 54,000 jobs — the sector has added an average of 59,000 jobs a month for a year.

Employment in leisure and hospitality rose by 53,000, government jobs climbed by 33,000, and the transportation equipment manufacturing category added 32,000, reflecting the return to work of Boeing and Textron Aviation employees who had been on strike.

The retail trade lost 28,000 jobs in November, and employment showed little or no change in other major industries during the month.

The labor force participation rate — the measure of the population that is in the workforce — was 62.5%, down slightly from the level of 62.6% the previous three months. The government said the rate has remained in a range of 62.5% to 62.7% since December a year ago.

Ahead of last Friday’s jobs report, the Labor Department said Tuesday in its monthly Job Openings and Labor Turnover Survey that vacancies nationally rose to 7.74 million in October from a downwardly revised 7.37 million in September.

The increase was led by the professional and business services sector, which had 209,000 unfilled jobs. Hirings decreased by 269,000, to 5.3 million. Layoffs fell by 169,000, which was the most significant decline since April 2023.

The number of vacancies per unemployed worker remained at 1.1, unchanged from the previous two months and about half of the top ratio of more than 2-to-1 in the early months of 2022.

The ADP Research Institute said last Wednesday in its National Employment Report for November that private-sector employment rose by 146,000, and annual pay was up by 4.8% on a year-over-year basis among people who stayed in their current jobs. Among job-changers, the gain was 7.2%.

“While overall growth for the month was healthy, industry performance was mixed,” Nela Richardson, the institute’s chief economist, said in a statement. “Manufacturing was the weakest we’ve seen since spring. Financial services and leisure and hospitality were also soft.”

The institute downwardly revised its October figure from 233,000 hirings to 184,000.

The institute said strong hiring at large employers led November’s growth — 120,000 of the new hires occurred at companies that employ 500 or more. Education, health care and construction were the category leaders. Growth was greatest in the South, where 61,000 were hired.