Key points:

  • The labor market remains strong with employers adding 263,000 jobs and the unemployment rate remaining low at 3.7%.
  • Payrolls continue to grow almost three times the pace needed to keep up with population growth.
  • Wage growth picked up, suggesting that pay gains may have more resilience than expected.
  • Several industries related to the sales and transportation of goods saw notable declines in jobs as in-person services such as restaurants and bars power headline growth. 

The US labor market has lost some momentum this year, but it’s still speeding ahead as we approach the new year. Employers are still adding jobs at a rate well above trend growth, unemployed workers are still finding jobs at elevated rates, and wage growth is still robust. Of course, this labor market does have its flaws. Industries that sell and transport goods saw notable declines in employment and labor force participation continues to stagnate. But the broader picture is similar to recent months: the labor market remains resilient.

Payrolls keep powering ahead, adding an average of 272,000 jobs over the past three months. Jobs would only need to grow about 100,000 per month in order to keep up labor force growth. The current pace is almost triple that rate, suggesting the labor market isn’t close to deteriorating imminently. 

The strong wage growth numbers and the high rate of job finding among the unemployed indicate that demand for workers is still very strong. Both jobs and wages have considerable momentum, a positive sign for the underlying strength of the US economy.

However, these gains don’t seem to be enough to pull more workers into the labor force. Perhaps this divergence is due to the more volatile nature and smaller sample size of the household survey. It’s worth keeping an eye on this divergence moving forward.

The strength of the overall labor market is particularly positive as the reallocation of the household spending away from goods is now showing up in payroll data. Department stores shed 21,800 jobs, Warehousing and storage declined 12,500, while Couriers and messengers jobs dropped by 12,400. This is in marked contrast to Food services and drinking places which alone added 62,100. After a brutal few years with the pandemic, in-person services are now powering the labor market recovery.

Continue to underestimate the momentum of the US labor market at your own peril. Jobs continue to be added at a pace that would have drawn cheers in 2019 and wages aren’t slowing as much as expected. The labor market might encounter some bumps in the round next year, but it’s heading into 2023 cruising.