Labor Market Rebounds from October Disruptions as Vehicle Sales Hit Highest Level since 2021

Key Takeaways:

• Nonfarm payroll employment rose by 227,000 in November, a rebound from the weak October report that was affected by strike activity and hurricanes Helene and Milton. Additionally, the prior two months of employment gains were revised upward by a combined 56,000. A gain of 32,000 jobs in transportation equipment manufacturing was due primarily to the end of strike activity, and a jump of 53,000 in leisure and hospitality likely represents in part a rebound from weather disruptions in October. The unemployment rate ticked up one-tenth to 4.2 percent, while average hourly earnings increased by 0.4 percent over the month.
• The Job Openings and Labor Turnover Survey (JOLTS) showed job openings rose by 372,000 to 7.7 million in October, partially reversing the decline of 489,000 openings the month prior, according to the BLS. The quits rate increased by two-tenths to 2.1 percent, the highest level since April but still below the 2.3 percent rate before the pandemic. Total layoffs and discharges declined to 1.6 million after rising to 1.8 million in September.
• The Institute for Supply Management (ISM) Manufacturing Index rose 1.9 points to 48.4 in November, its highest level since June. The new orders index increased 3.3 points to 50.4, its first time above the expansionary threshold of 50 since March. The production index was up six-tenths to 46.8, while the non-seasonally adjusted prices paid index declined 4.5 points to 50.3 after a 6.5-point jump upward the month prior.
• The ISM Services Index declined 3.9 points to 52.1 in November, a three-month low. The decline was broad-based with the business activity index down 3.5 points to 53.7, the new orders index down 3.7 points to 53.7, and the employment index falling 1.5 points to 51.5. The prices paid index was essentially flat at 58.2.
• Light vehicle sales rose 3.0 percent in November to a seasonally adjusted annualized rate of 16.7 million, the highest reading since May 2021, according to Autodata.
• The real goods U.S. trade deficit narrowed by $7.3 billion in October, according to the Census Bureau. Real exports declined 4.2 percent, while real imports were down by 5.5 percent.
• Private residential construction spending increased 1.5 percent in October, according to the Census Bureau. Spending on single-family and multifamily construction rose 0.8 percent and 0.2 percent, respectively. Spending on improvements jumped 2.7 percent.

Forecast Impact:

The November rebound in employment gains following the October report, which was suppressed due to hurricane disruptions and strike activity, was largely in line with our expectations. After accounting for the effects of the weather and strike disruptions, we believe this report represents underlying trend growth rate of around 100,000 to 150,000 jobs per month, in line with our forecast. This is also consistent with a relative stabilization in JOLTS data. However, due to positive revisions to prior months, employment gains in the current quarter are tracking a bit above our estimate.

Data elsewhere was mixed. The strong light vehicle sales report should boost consumption growth in the current quarter, presenting some upside risk to our forecast. Still, the decline in the ISM services index and the still-contractionary reading in the manufacturing index are consistent with our forecast for slowing economic growth in 2025.

Nathaniel Drake
Economic and Strategic Research Group
December 6, 2024

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