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The Line: Surprise, Surprise, Surprise!

Gregory Heym is Chief Economist at Brown Harris Stevens. His weekly series, The Line, covers new developments to the economy, including trends and forecasts. Read on for the latest report and subscribe here to receive The Line in your inbox.



That’s right Gomer Pyle, the November employment report was a surprise with 263,000 jobs added last month. Expectations had been for 200,000, so this is a blow-away number. The unemployment rate remained at 3.7%, which is great news considering all the talk about layoffs these days. After the November ADP private-sector employment data released last Wednesday came in way below expectations, I had been preparing to write a "ruh-roh" column, so this report made my day much happier. By the way, did you know the phrase "ruh-roh" wasn’t originated by Scooby-Doo? It was Astro who first uttered it on "The Jetsons"—but I digress. Can you tell I watched too much TV as kid?


Here are the highlights of the Labor Department’s report:

  • Through the first 11 months of 2022, monthly job growth has averaged 392,000.

  • Job gains in November were led by leisure and hospitality (+88,000), while retail (-30,000) posted the biggest loss.

  • Wages increased by 5.1% over the last year, easily beating the 4.6% forecast.

You can view the full report at this link.


Is there any bad news here? Kind of. Let’s start with the report itself before looking at the bigger picture.


As you may remember from prior columns, the data for the Labor Department’s report comes from two surveys: the establishment (or payroll) survey and the household survey. The establishment survey collects payroll data from companies, which is then used to determine how many jobs are added or lost each month. It is the larger survey of the two.


The household survey is used to determine the unemployment rate and other measures of the labor force. This survey also produces a count of the number of jobs gained or lost each month, which can be very different from the payroll survey but typically moves in the same direction.


If we look at the past two months, the payroll survey shows a gain of 547,000 jobs, while the household survey has a loss of 466,000. Since the payroll survey has a much larger sample, its data is usually the one economists and the media focus on. That said, even with their differences in methodology, it’s concerning these two numbers are so far apart.


Another bit of concerning news in the household survey is the lack of improvement in the labor force participation rate. At 62.1%, it remains below the 63.4% pre-COVID-19 rate. This rate measures the percent of working-age Americans either working or actively looking for work, so it’s concerning it is this low at a time when there are 10.33 million unfilled jobs.


All that said, the real worry here is this report may impact the Fed’s next rate hike decision. They are scheduled to meet again Dec 14-15, and Chairman Powell stated on Wednesday he expects smaller hikes starting this month. They have done 75-basis-point hikes after the last four meetings, so this statement has Wall Street expecting a 50-basis point hike this month. After the news came out, the Dow posted a gain of more than 700 points on Wednesday.


If the Fed decides this strong employment report warrants another 0.75% increase, it would be brutal for stocks. The Dow fell almost 300 points after the employment report came out this morning—a taste of the anxiety we can expect over the next two weeks.


Sorry to go a bit long, but there was a lot to go over here. Here’s what you really need to know about the November employment report:


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