Hiring Pace Back on Track; Indicators Point to Fed Rate Hike in December

December 7, 2015

  • U.S. employers hired new workers at a healthy clip last month, keeping the economy on target to add 2.5 million jobs in 2015. The payroll gains in November, and upward changes to the totals of the preceding two months, likely remove the final obstacle to the Federal Reserve making its long-awaited increase in its overnight lending rate later this month. Future moves in the central bank’s tightening campaign will remain dependent on further improvements in the U.S. economy and progress toward reaching the Fed’s targeted level of inflation.
  • Employers added 211,000 jobs in November, mirroring the average monthly increases recorded year to date. Gains were spread across a number of industries, including those closely associated with consumer activity. Growth in the trade sector featured the addition of nearly 31,000 positions at retail outlets. Initial estimates of Black Friday activity, however, revealed a high volume of sales conducted online, leaving unclear how many more posts will be required at
    brick-and-mortar stores during the holidays. Hotel and restaurant openings, plus increased staffing needs for holiday events and travel, supported a gain of 39,000 leisure and hospitality jobs in November. Healthcare providers also continued to expand staffing but, outside of consumer-driven sectors, manufacturing employment slipped, and natural resources and mining cut 11,000 posts.
  • Accompanying the expansion of payrolls, other gauges of labor-market conditions offered positive signals. Most conspicuously, the unemployment rate held at 5 percent, while the underemployment rate ticked up slightly to 9.9 percent. Still, the reading of less than 10 percent in this widely watched measure of labor-market slack marks the second-lowest reading over the past seven years. Wage growth, meanwhile, remained on a positive trajectory, with an uptick in November resulting in a 2.3 percent gain during the past 12 months.
  • The addition of workers at shopping centers and stores occurs in conjunction with a period of improving property performance in the retail sector. Growing space demand continues to outpace subdued completions, leaving the U.S. vacancy rate at 6.3 percent in the third quarter, the lowest level in nearly 10 years. More store openings will lower the rate to 6.1 percent this year and raise rents, though new space may be needed to relieve pent-up demand from retailers seeking to grow locations in 2016.
  • Conditions in the U.S. industrial property sector are also strengthening as retailers looking to provide same-day delivery to customers continue to emerge as a new source of demand for space in major metros. This year, the U.S. vacancy rate is on track to slide 60 basis points to 6.1 percent, which will support an increase in the average rent of more than 5 percent.

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The information contained herein was obtained from sources deemed reliable. Every effort was made to obtain complete and accurate information; however, no representation, warranty or guarantee to the accuracy, express or implied, is made.

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