The Fed finally gets its wish—Hiring tanks ahead of holidays
The Fed's efforts to slow the economy seem to be working—with job growth on track for its weakest 3-month stretch since the pandemic.
According to payroll processor ADP, private-sector employers added just 103,000 workers in November—well below forecasts of 130,000.
That follows a dismal hiring pace of 106,000 in October and 89,000 in September, marking the weakest stretch of hiring since the pandemic.
Employment in manufacturing and construction declined by 19,000, while the leisure and hospitality industry shed 7,000 workers.
Gains were reported in trade and transportation (55,000), education and health services (44,000), and finance (11,000).
Wages grew at an annual pace of 5.6%, the weakest since September 2021. Job hoppers who landed a new gig increased their pay by 8.3%, the smallest increase since June 2021.
“Restaurants and hotels were the biggest job creators during the post-pandemic recovery,” said ADP chief economist Nela Richardson.
“But that boost is behind us, and the return to trend in leisure and hospitality suggests the economy as a whole will see more moderate hiring and wage growth in 2024,” she added.
The end of “revenge spending”?
The relative decline in leisure and hospitality employment suggests Americans’ post-pandemic spending spree—marked by “revenge travel” and “lifetime experiences”—has ended.
Meanwhile, food and accommodation were two of just three service industries to report a decline in business activity in September and October, according to the Institute for Supply Management.
Industry insiders say part of the problem is stubbornly high inflation driving up costs and prices for consumers.
Another reason for the declined spending is the dwindling excess savings accumulated during the pandemic.
According to the San Francisco Fed, excess savings peaked at roughly $2.1 trillion in mid-2021 but have fallen to less than $400 billion since.
This is what the Fed wants
While a slowing economy is bad for businesses, it is exactly what the Fed wants as it tries to curb consumer prices.
A slowing job market, in particular, is “welcomed to see,” according to Richmond Fed president Thomas Barkin.
The good news is the Fed may get its wish without tipping the economy into a nasty recession. U.S. GDP growth is forecast to slow next year, but not enough to enter a recession, according to Goldman Sachs.
For the average American, this means additional rate hikes driving up the cost of borrowing are probably off the table for now.
The Fed hiked rates 11 times in 17 months but recently signaled that it’s in wait-and-see mode. Fed officials will hold their final interest rate meeting of the year on Dec. 12-13.