ADP reported that the number of non-farm workers increased by 534,000 jobs from October to November, slightly higher than the 531,000 increase from September to October. The majority of this comes from the service sector, which accounts for 79.4% of the new jobs created. However, due to a possible winter COVID-19 wave, this raises concerns about whether payrolls in the private sector will remain at this level.
Economists believe employment growth cannot sustain this pace unless the workforce recovers more significantly in the months ahead. This is especially important as the unemployment rate is projected to fall from 4.6% to 4.5%, the lowest level since March 2020. With the federal vaccination mandate, which includes over 100 million workers and on the 4th, it has been suggested that wages in the private sector could fall and the unemployment rate could rise in the coming months. While workers are slowly returning to work, economists believe that a deeper increase will not occur until spring 2022.
The labor force participation rate is expected to rise slightly from 61.6% in October to 61.7%, which is still well below pre-pandemic levels of 63.3%. As inflation lowers individual purchasing power and fiscal support dwindles, people are expected to want to return to work. However, external factors, including barriers to work from a pandemic, continue to hold back the recovery in labor force participation. The Fed also emphasized balanced employment growth across groups and the revitalization of labor force participation as its main focus.
As inflation continues to rise, average hourly wages have also hit new heights recently. The average hourly wage in November is expected to remain at the October level at 0.4%. Year-to-year average hourly wages are projected to be 5%, the highest in three decades. This suggests that inflation is also very important in terms of the Fed’s focus.
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