November jobs report shows US economy added 263,000 jobs

The unemployment rate stood at 3.7% last month, a historically low level pushing up wages. Average hourly wages increased 5.1% year-on-year in November, well above the pre-pandemic pace of around 3%. One reason employers continue to push wages aggressively is that the labor force participation rate, which is below pre-pandemic levels, declined last month.

Low unemployment and rising wages are not only boosting consumer spending, the economy’s main driver, but are also putting pressure on inflation, which has remained at a nearly 40-year high. Federal Reserve officials say they will likely raise interest rates to keep them at levels high enough to slow economic activity and employment and keep inflation under control.

The jobs report puts the central bank on track to raise interest rates by 0.5% within two weeks, which will put the benchmark Federal Funds rate in the 4.25% to 4.5% range.

One of the big questions is how long the labor market will stay strong as the Federal Reserve (Fed) raises interest rates. Employment increased in leisure and hospitality, health care and government in November. Information departments, including many technical jobs, also hired workers with a healthy clip.

But there are cracks. Some companies in technology, entertainment and real estate are laying off workers, and many are growing worried about the economic outlook. Retail and warehousing companies are cutting jobs this holiday season as consumers shift spending from goods to services such as restaurants.

Economists worry that higher interest rates will trigger more widespread layoffs and a recession next year, as has typically happened with previous episodes of rapid interest rate hikes. They are closely monitoring the pace of hiring for early signs of shifts in labor market momentum.

“Employers will start hiring less long before they start letting go of their existing workforce,” said Guy Berger, chief economist at LinkedIn. “That’s the first lever.”

He said unemployment could rise as fewer opportunities are available to job seekers. Ongoing claims, which reflect the number of people seeking continued unemployment benefits, are trending upward as a sign of a cooling labor market, Berger said.

This week, CNN announced it was laying off employees, and DoorDash Inc. announced it would be cutting about 1,250 employees. AMC Networks Inc. said in a memo to employees that it plans to lay off about 20% of its US workforce.

Corporate layoff announcements are generally concentrated in the technology industry and interest rate-sensitive sectors of the economy such as housing and finance. Other companies are rapidly gaining laid-off workers as even sectors such as real estate are well above pre-pandemic levels.

LodeStar Software Solutions, a small software company that helps mortgage lenders accurately disclose fees to consumers, said it recently posted a job opening for a customer service position, based in Conshohocken, Pennsylvania. said Jim Paolino, CEO of the Put Company.

Mr. Paolino soon received about 130 resumes for jobs involving account management. He did a screening call with 10 of his applicants, 8 of whom lost their jobs at mortgage companies.

“In fact, now is a great time to hire,” he said. “There is an influx of talent into the industry and the market as many large companies have made fairly large layoffs.”

Companies are still largely avoiding layoffs as demand for their goods and services remains strong. Private consumption increased 0.8% from the previous month, the Department of Commerce said Thursday.

Some companies are hesitant to lay off workers because it has become so difficult to rehire them as the economy recovers from the pandemic’s downturn.

Becky Frankewicz, president and chief commercial officer of staffing firm ManpowerGroup, said:.

“There is still an aftermath of ‘I want to leave the talent I have'”

Companies still offer hiring bonuses to attract talent, but the rationale is somewhat different from a year ago. Employers expect inflation to come down, she said, and bonuses offer more flexibility in adjusting compensation than wage increases.

“What if you’re still short of talent and don’t want to secure higher wages in every role? You give bonuses,” Mr. Frankiwicz said.

Wage growth has slowed in recent months, but is above its pre-pandemic pace.

Still, there are signs that spending may be hitting its limits, and some Americans are saving more or borrowing credit cards to fund purchases. His October personal savings rate was 2.3%, the lowest since his 2.1% in July 2005.

David Blake, president of Iowa-based Blue-9 Pet Products, said sales were about flat this year, with the 10-employee dog training accessory manufacturer and distributor seeing double-digit growth. He said it was a change from the previous year, which recorded sales growth.

Pet owners appear to be holding off on some discretionary purchases as they face higher prices for essentials such as groceries, he said.

“Whether we’re in recession or not, the fact remains that inflation is affecting spending,” Blake said.

Mr. Blake has postponed hiring new employees for this year because of sluggish sales. We also have no plans to add it next year.

—Gabriel T. Rubin contributed to this article.

Please contact Sarah Chaney Cambon at sarah.chaney@wsj.com.