Falling unemployment shows that the labor market remains tight even as job growth slows

Career Climbers / 5th December 2016

Employment increased by 178,000 in November after increasing by a downwardly revised 142,000 jobs in October. These figures are consistent with a general slowdown in employment growth since early 2016 relative to 2015.

Surprisingly, the unemployment rate declined from 4.9 percent to 4.6 percent. This decline may be temporary as it reflects both continued employment growth and what may be a temporary interruption in labor force participation growth. It could also reflect the difficulty many workers who lost their jobs during the Great Recession still experience in rejoining the labor force, as the demand for jobs may not match the skills outstanding potential workers have to offer.

The low unemployment rate is consistent with a tighter labor market that has continued to place upward pressure on wages. Wage growth fell back from 2.8 percent to 2.5 percent on an annual basis, but a more detailed look at recent labor market data suggests that workers continue to gain bargaining power. The share of employees voluntarily leaving their jobs is near a post-recession high.

Professional and business services continue to be the main driver of continued job growth. Manufacturing in contrast has struggled in 2016 and a stronger dollar will make this trend even more difficult to reverse.

Weaker than expected GDP growth along with global economic and geopolitical uncertainty has caused the Federal Reserve to delay planned rate increases so far in 2016. Low unemployment rates will provide the bank with room to start the rate normalization process thanks to faster wage growth, higher inflation expectations, and a rebound in oil prices.

About The Conference Board
The Conference Board is a global, independent business membership and research association working in the public interest. Our mission is unique: To provide the world’s leading organizations with the practical knowledge they need to improve their performance and better serve society. The Conference Board is a non-advocacy, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States. www.conference-board.org

You May Also Like

Successfully Navigating External Dynamics as a First-Time CEO

Career Climbers / 8th July 2024

According to the Harvard Business Review, two out of five CEOs fail in their first eighteen months, and it’s not their expertise or experience to blame; it’s their people skills,...

Winning the Game of Boardroom Chess

Entrepreneurs / 3rd July 2024

How subtle, seemingly innocuous actions can shift the balance of power in your favour It is broadly understood that bold, expansive postures and gestures convey power and credibility. But how often have...