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  • Alex Haseldine

US Labour Market: Almost Back to Normal

Updated: Dec 12, 2023



Friday's US employment report showed that the rate of private payroll gains ticked up slightly, but at 1.3% the annualised rate in November is below the non-recession average since 2001 of 1.7%.


The vast majority of new jobs being created are for 'in-person' services. Education & Health and Leisure & Hospitality are still the hot-spots with employment growing at 4.9% and 4.6% respectively Q/Q (annualised). Meanwhile, supply chain related sector employment has slowed to a standstill with Manufacturing and Trade & Transportation employment growing at 0.1% and -0.3% at a quarterly annualised basis.


The three-month moving average of job cuts are down from their peak of 90k in April of this year to 37k in October but certainly remain above their levels seen at the heights of the labour shortage in late 2022. The unemployment rate fell from 3.9% to 3.7% in November.


Meanwhile, the household employment survey showed gains of 747k on the month, significantly above the average of the last 12 months at 260k. In addition, the 3-month moving average of job cuts edged down to 36.8k from about 50k in October.


Figure 4 shows the quantity of available US workers vs potential demand, which is the sum of household employment and US job openings. Following the 617k fall in job openings and 348k fall in employment in October, potential demand, fell by 965k. As we wait for November's job vacancy number more timely measures of vacancies point towards further declines. Given this month's 747k increase in household employment, a fall in job vacancies is unlikey to offset this, so we have pencilled in an increase of 563k for potential labour demand in November.


Currently, the ratio of potential demand of labour to the labour force is just above pre-pandemic levels. Although this may not be much consolation since the labour market was already historically tight in 2019, we expect this measure of labour market tightness to dip below this level by the end of Q1 2024.


Finally, year on year wage growth continues to make progress towards its normal range of 2-4%, falling by one basis point in November to 4.3%

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