U.S. Employment Rises in November, but Wage Growth Remains Weak

Economic Straight Talk

  • Today’s U.S. employment report offered another solid month of job gains, with 228,000 positions added and the unemployment rate holding steady at 4.1 percent. November was the 86th consecutive month of job growth, and the gains were above experts’ expectations. There have been 2.07 million jobs created over the last year.
  • Continued solid gains in employment coupled with steady consumer spending and improved business investment suggest economic growth of around 3 percent. These positive indicators will probably nudge the Federal Open Market Committee to increase interest rates later this month and again in the first quarter of 2018.
  • A wide range of industries added jobs, with the professional and business services sector — which generally pays higher wages — manufacturing, and health care leading the gains.
  • The information sector continued shedding jobs, a trend that started about a year ago. That industry mostly includes jobs in publishing, broadcasting, telecommunications, motion pictures, and sound recording.
  • While solid job gains continue to confirm the labor market’s strength, experts are increasingly focused on the lack of wage growth, which was anticipated to be higher at this point in the employment cycle. November hourly earnings increased, but the gains were below expectations. However, the average hours worked per week increased again, which is helping overall worker pay. Note that the lower-than-expected wage growth is outpacing inflation growth, suggesting that real earnings are positive. Generally, economists do anticipate acceleration of wage growth over the next year. Sluggish wage growth has been a concern among economists, though many believe that slow inflation and weak productivity are to blame, for which there are no clear explanations.
  • Looking forward, the Job Openings and Labor Turnover Summary report from the U.S. Bureau of Labor Statistics shows that the number of job openings has remained near record-high levels since June of this year, at 6.1 million. Again, with most openings in the professional and business services sector, that number suggests that there are more jobs than qualified employees.
  • Tech jobs increased by 8,100 positions in November, according to CompTIA — mostly in computer, electronics, and semiconductor manufacturing. This aligns with continued gains seen in total manufacturing job numbers. The IT and software services and computer-system design industries also saw solid gains. However, IT jobs added, which illustrates demand for such talent by businesses across all sectors of the economy, jumped by 243,000 in November, the largest increase since 2015. New job postings for IT occupations remained flat in November, at about 180,000 positions across the nation. That is about 30,000 more jobs than at the same time last year but down from more than 250,000 in January 2016. Still, while lower than two years ago, the trend has not shown consistent declines but has averaged 200,000 positions over the last year.
  • Lastly, the Federal Reserve released its latest flow of funds report this week, which showed household and nonprofit net worth increasing to $96.9 trillion during the third quarter of 2017, with the value of household real estate climbing to $24.2 trillion. The value of household real estate is now above the bubble peak in early 2006 — not adjusted for inflation and including new construction.

Selma Hepp is Pacific Union’s Chief Economist and Vice President of Business Intelligence. Her previous positions include Chief Economist at Trulia, senior economist for the California Association of Realtors, and economist and manager of public policy and homeownership at the National Association of Realtors. She holds a Master of Arts in Economics from the State University of New York (SUNY), Buffalo, and a Ph.D. in Urban and Regional Planning and Design from the University of Maryland.

(Promotional image: iStock/Rawpixel)

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