Editor’s note: Dr. Mike Walden is a William Neal Reynolds Distinguished Professor Emeritus at North Carolina State University.
RALEIGH – The November job market was more robust than forecasters expected.
Business payrolls increased by 199,000, above the expected gain of 190,000, and well above the 150,000 increase in October. The separate household survey also showed a significant increase in the number of people having jobs. Wage growth was strong – rising at an annual rate of 4% – and the unemployment rate dropped from 3.9% in October to 3.7% in November. It is important to note the numbers are all adjusted for typical seasonal changes.
Although the results are certainly good news, all economic data needs to also be viewed through the lens of the Federal Reserve and their efforts to moderate the inflation rate. My view is the Fed will be somewhat concerned that these numbers are too strong, especially the annualized 4% rise in wages.
Remember, the Fed’s goal is to slow growth, but not cause a recession. The November numbers point to an acceleration of growth. Will the results cause the Fed to change their interest rate policy and possibly increase interest rates when they meet next week?
My guess – emphasize, “guess” – is the Fed will keep their key interest rate stable. Some of the job gains in November were due to striking workers returning to their jobs. Seasonal adjustments can also be tricky. Thus, I expect the Fed to keep their interest rate policy stable, and not make a move – especially up -until after the holidays.
In the meantime, we certainly want to celebrate the fact more people have jobs and paychecks are rising, especially during the holiday season. The question is the long-run impact on policy. Will the Fed still believe the economy is on track for the magic “soft landing” in 2024, where inflation returns to a reasonable level without the economy enduring a recession? Is the good news we see in the job market really good news? Or will the good news prompt some negative consequences we’d like to avoid? We’ll have some answers when the Fed meets next week.