Labor Market Continues To Heat Up, Unemployment Steady at 4.1%

Overheating may not be the description of the labor market but heating up definitely is. Nonfarm payrolls rose a stronger-than-expected 228,000 in November led by outsized gains for manufacturing at 31,000, construction at 24,000, and professional services at 46,000.

Pointing to the risk of labor constraints is a rise in the average workweek, up 1 tenth to 34.5 hours for private-sector employees. Another risk is the lack of available workers, reflected most clearly in the unemployment rate which is unchanged at a 17-year low of 4.1 percent.

Yet all this demand has yet to translate into wage inflation which remains subdued. Average hourly earnings, at $26.55, did rise 0.2 percent in the month but the prior month is revised 1 tenth lower and is now at minus 0.1 percent. The year-on-year rate is only 2.5 percent which is historically low for this reading.

The bumps have come and gone and the labor market is where it was before the hurricane season, continuing to grow and continuing to absorb what is a very thin pool of available labor. Still, for the fourth-quarter outlook, today's report points to strong year-end momentum for the economy.

Recent History Of This Indicator:
Hurricane effects are expected to be confined to September, when nonfarm payrolls rose only 18,000, and to October when they snapped back to 261,000. November's consensus is an intrend and still strong 190,000. The unemployment rate never showed much effect from the hurricanes, dropping a tenth in October to 4.1 percent where it is expected to hold in November. Moderate strength is expected for average hourly earnings, at a consensus 0.3 percent monthly gain for an improving 2.6 percent year-on-year rate. Other calls are for a 184,000 rise in private payrolls, another strong gain at 20,000 gain for manufacturing payrolls, and no change for the workweek at 34.4 hours.