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A soft landing for the economy looks more likely after new jobs report

You're hired: Employers added a stronger-than-forecast 199,000 jobs in November.Michael Dwyer/Associated Press

The government’s upbeat employment update on Friday keeps the prospect for a soft landing — returning inflation to more normal rates without inflicting a painful recession — very much alive.

The news: Hiring expanded last month but so did the pool of available workers, the Labor Department said, improving the balance between demand from employers and the supply of workers. Wages rose at a strong but still-manageable clip. The ranks of the unemployed shrank.

What it means: The economy is chugging ahead at a pace that is moderate enough to allow the Federal Reserve to cut borrowing costs next year, though probably not as soon as the most optimistic forecasters had predicted.


The report adds to “evidence that the ‘immaculate soft landing’ has about a 90 percent chance of being realized,” said Brian Bethune, an economist at Boston College.

The numbers: Employers added 199,000 jobs in November, a tally that was boosted by about 30,000 auto workers who ended their strike against the Big Three.

Hiring has slowed from earlier in the year — employment gains averaged 257,000 a month during the first half of the year, a rate indicative of an overheated economy that would make it nearly impossible to get inflation back down to the Fed’s 2 percent target.

November’s job gains were led by the health care sector, which added 77,000 jobs, the government, up 49,000, and leisure and hospitality, up 40,000.

Retail trade employment fell by 38,000 and is mostly flat for the year. The information sector added 10,000 jobs, as the actors and writers strikes ended, but the employment has dropped by 104,000 since reaching a peak in November 2022.

The unemployment rate dipped to 3.7 percent from 3.9 percent in the previous month. The labor force — the number of people with a job or actively looking for one — increased by more than a half million. That pushed the participation rate back to its high for the year of 62.8 percent.


Average hourly wages rose 4 percent over the past 12 months, somewhat higher than the Fed would like to see.

“We anticipate that wage pressures will cool further in the months ahead as labor market conditions soften further,” said Lydia Boussour, senior economist at Ernst & Young.

Stepping back: The Fed’s aggressive rate hikes have cooled inflation. The central bank’s preferred measure of prices rose 3.5 percent in October, down from a post-Covid peak of 5.3 percent in February 2022, the month before it began boosting borrowing costs.

Economic growth is expected to slow to 1.2 percent next year, according to a National Association of Business Economists survey released on Monday, from an estimated 2.4 percent this year. Survey respondents see unemployment peaking at 4.3 percent in the third quarter.

While the odds of a recession have faded since the start of the year, a sharp downturn remains possible. Also possible: Inflation remains above the Fed’s target well past next year.

Which is why Fed officials are sticking with their wait-and-see approach. Most analysts believe policy makers are done raising rates, and will hold rates steady at their Dec. 12-13 meeting. The Fed last raised rates at the end of July. The debate is over when they will feel comfortable enough to begin lowering them.

Final thought: Financial markets took off in November amid growing speculation that the Fed would start easing credit as soon as March. The stronger-than-forecast job and wage gains in Friday’s job report likely means the wait for lower rates will be longer.


Still, reaction on Wall Street to the employment news was mostly positive. The Standard & Poor’s 500 index rose 0.4 percent to record its sixth consecutive week of gains. The price of the benchmark 10-year Treasury fell, pushing the yield up to 4.23 percent from 4.15 percent on Thursday.

“Expectations of many cuts next year that begin in the first quarter will be pared back,” Derek Tang, an economist with LH Meyer/Monetary Policy Analytics, told Bloomberg. “Fed policy makers will seize on this to call for patience and a longer hold.”

Larry Edelman can be reached at larry.edelman@globe.com. Follow him @GlobeNewsEd.