The U.S. labor market remains historically tight, with many employers competing for a limited pool of workers and bidding up wages despite an uncertain economic outlook.
Employers added 263,000 jobs in November, holding near the strong gains of the previous three months, when they averaged 282,000 a month, the Labor Department said Friday. Job growth has slowed from the first half of the year and continues to well exceed its 2019 prepandemic pace, though some large corporations have recently announced layoffs.
The jobless rate remained at 3.7% last month, a historically low level that is pushing up wages. Average hourly earnings grew 5.1% in November from a year earlier, holding above the prepandemic pace of roughly 3%. One reason employers might continue to raise pay briskly: Labor force participation, or the share of adults working or seeking a job, remains below prepandemic levels and ticked down last month.
U.S. stocks retreated and the yield on the benchmark 10-year Treasury note rose after the stronger than expected report.
Low unemployment and wage gains are helping fuel consumer spending—the economy’s main engine—but also contributing to inflation that is running close to a four-decade high.
The jobs report keeps the Federal Reserve on track to raise interest rates in two weeks by a half percentage point, which would bring the benchmark federal-funds rate to a range between 4.25% and 4.5% from its current range. It also underscores the risk that officials will lift the rate above 5% in the first half of next year.
Revised wage data released Friday could concern Fed officials because it points to an acceleration in pay gains in recent months. Average hourly earnings grew swiftly in November from a month earlier across industries including retail, transportation-and-warehousing and information services.
One big question is how long the labor market’s strength can last as the Fed raises interest rates. In November, payrolls grew in leisure and hospitality, healthcare and government. The information sector—which includes many tech jobs—also hired workers at a healthy clip.
But cracks are emerging. Some companies in technology, entertainment and real estate are shedding workers, with many growing nervous about the economic outlook. Firms in retail and warehousing are cutting jobs this holiday season as consumers shift their spending from goods to services such as restaurants.
Economists expect higher interest rates will trigger more widespread layoffs and some forecast a recession in the next year, as has typically occurred during prior episodes of fast rate increases. They are closely monitoring the pace of hiring for signs of shifts in labor-market momentum.
“An employer is going to start reducing hiring long before they start letting go of their existing workforce,” said Guy Berger, principal economist at LinkedIn. “That’s the first lever.”
The payrolls figures, which are subject to revisions, might overstate the strength of the job market, some economists said. A more comprehensive data set known as the quarterly census of employment and wages shows jobs have grown by 500,000 less in the year through June than payrolls indicate, according to UBS. Because monthly payrolls are eventually adjusted using those more comprehensive figures—which are based on employer tax records—they will likely be revised down.
CNN said this week it was laying off employees, and
DoorDash Inc.
said it would trim its corporate staffing levels by about 1,250.
AMC Networks Inc.
said in a memo to employees that it plans to lay off about 20% of its U.S. workforce.
Corporate layoff announcements generally have been concentrated in the technology industry and sectors of the economy sensitive to interest rates such as housing and finance. Other businesses are quickly scooping up laid-off workers as job openings remain well above prepandemic levels, even in sectors such as real estate.
LodeStar Software Solutions, a small software company that helps mortgage lenders accurately disclose fees to consumers, recently posted an opening for a customer-service role, said Jim Paolino, chief executive of the Conshohocken, Pa.-based company.
Mr. Paolino quickly received about 130 résumés for the job, which entails account management. He held screening calls with 10 applicants, eight of whom had lost their jobs at mortgage companies.
“It’s actually a great time to hire right now,” he said. “There has been an influx of talent in our industry and to the market because a lot of larger companies have done pretty large-scale layoffs.”
Some firms are hesitant to lay off employees because they found it so difficult to rehire as the economy recovered from the pandemic downturn.
“Demand restarted, and they couldn’t hire fast enough,” said
Becky Frankiewicz,
president and chief commercial officer of staffing firm
“There’s still this aftershock of, ‘I want to hold on to the talent that I have.’”
Companies are largely avoiding job cuts because demand for goods and services is solid. Personal spending rose 0.8% from the prior month, the Commerce Department said Thursday.
Still, there are signs that spending could be reaching a limit, with some Americans dipping into savings or taking on credit-card debt to finance purchases. The personal-saving rate was 2.3% in October, its lowest level since 2.1% in July 2005.
Jobs by industry, monthly change
Real estate,
rental and leasing*
Performing arts and spectator sports
Museums, historical sites, and similar institutions
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Amusements, gambling, and recreation
Food services and drinking places
Real estate,
rental and leasing*
Performing arts and spectator sports
Museums, historical sites, and similar institutions
Rental and leasing services
Amusements, gambling, and recreation
Food services and drinking places
Real estate,
rental and leasing*
Performing arts and spectator sports
Museums, historical sites,
and similar institutions
Rental and leasing services
Amusements, gambling, and recreation
Food services and drinking places
Real estate, rental and leasing*
Rental and leasing services
Performing arts and spectator sports
Museums, historical sites, and similar institutions
Amusements, gambling, and recreation
Food services and drinking places
Real estate, rental and leasing*
Rental and leasing services
Performing arts and spectator sports
Museums, historical sites, and similar institutions
Amusements, gambling, and recreation
Food services and drinking places
David Blake, president of Iowa-based Blue-9 Pet Products, said sales have been roughly flat this year, a shift from previous years when the 10-person manufacturer and seller of dog-training accessories posted double-digit sales growth.
Pet owners appear to be cutting back on some discretionary purchases as they face higher prices for staples such as groceries, he said.
“Whether we’re in a recession or going to have a recession or not, the fact still remains that the inflation out there is having an impact on spending,” said Mr. Blake.
Due to slower sales, Mr. Blake held off on hiring new employees this year. He also doesn’t plan to add any next year.
—Gabriel T. Rubin contributed to this article.
Write to Sarah Chaney Cambon at sarah.chaney@wsj.com
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