– December 8, 2017
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U.S. nonfarm payrolls added 228,000 jobs in November, the second monthly gain above 200,000 in a row. Employment gains combined with a longer workweek and rising earnings pushed aggregate payrolls up by 4.8 percent from a year ago, the fastest increase since January 2016 (see chart). Overall, gains in aggregate payrolls have been in the 3 to 5 percent range for most of the past seven years, providing a solid base for growth in consumer spending and supporting the current economic expansion.

Within the 228,000 gain in jobs, goods-producing industries added 62,000 employees in November, well above the average gain of 36,000 over the past year. Durable-goods manufacturing and construction led with additions of 27,000 and 24,000 jobs, respectively. Within private service-producing industries, which typically account for the lion’s share of job creation, payrolls added 159,000 workers, led by a 46,000 increase in professional and business. Health care and social-assistance industries added 41,000 jobs in November while retail added 19,000 workers and leisure and hospitality added 14,000. The public sector added 7,000 employees.

The unemployment rate held steady in November, matching October’s 4.1 percent rate. That is the lowest rate since December 2000. The labor force participation rate also held steady in November, at 62.7 percent. The participation rate has been slowly drifting higher since hitting a cycle low of 62.4 percent in September 2015, but remains well below the 66.0 percent rate that prevailed for the 2004 through mid-2008 period.

Average hourly earnings rose 0.2 percent in November, resulting in a 12-month gain of 2.5 percent. For production and nonsupervisory workers, the gain was slightly lower: 2.3 percent. Gains in average hourly earnings have been below gains in previous cycles. Increases in consumer prices have also been slower during this expansion, making gains in real hourly earnings more impressive than nominal gains. The average length of the workweek increased by 0.1 hours to 34.5 hours in November.

Combining payrolls with hourly earnings and hours worked, the index of aggregate weekly payrolls rose 0.7 percent in November and 4.8 percent from a year ago. This aggregate measure has posted relatively steady year-over-year gains in the 3 to 5 percent range since 2010. In prior cycles, this measure tended to be more cyclical, hitting growth rates in the 7 to 8 percent range but then collapsing. The slower and relatively steady gains in the current expansion may prove more beneficial as they may help sustain the economic expansion over a longer period compared to the faster, more cyclical gains of previous economic expansions.

Broad-based gains in the labor market are providing support for consumer confidence and consumer spending. Overall, the current economic expansion is maintaining solid momentum and the sources of growth are broadening. Meanwhile, pressures on prices remain moderate, suggesting monetary policy is likely to remain on a slow path of normalization. Combined, these trends suggest continued economic expansion over the coming months and quarters and increase the probability that the current expansion will remain on track to become the second-longest on record.

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Robert Hughes

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Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.
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