In this edition of our Race, Jobs, and the Economy series decoding each month’s Bureau of Labor Statistics (BLS) monthly jobs report, we overview the current state of the labor market and discuss the economic plans of the incoming Trump administration.
Analysis of Topline Figures in the December BLS Report
The economy added 229,000 jobs in November, a major rebound from the previous month’s measly 12,000. The unemployment rate inched up to 4.2%. While still historically low, the slight increase in joblessness signals a stagnating economy.
The biggest gainers were: health care (+54,000), leisure and hospitality (+53,000), and government (+20,000). Notably, retail trade lost 28,000 jobs in November after losing 4,000 in October.
This decline is striking considering that it is the holiday shopping season. However, shifting holiday sales strategies, earlier retail hiring, and changes to the retail labor force may explain the dismal retail trade job numbers. Nevertheless, any changes in consumer spending this holiday season will serve as an indicator of the future of the US economy.
The private sector added 194,000 jobs, over twice as much as the three-month moving average of October. Part of the gains came from the end of the Boeing strike, with about 33,000 workers returning to their job sites. This means roughly 30,000 jobs are not necessarily “new” gains (and were not “new” job losses in the BLS data released prior to the strike’s end).
The Black unemployment rate reached its highest level since early 2022 at 6.4%. Joblessness for Black women jumped by more than a full percentage point to 6%. More than a quarter-million Black workers lost jobs last month even though the overall economy performed well. The Black jobless rate has reached 6.4% two previous times. The last time was in March 2024. The rate has since remained elevated.
Rising Mortgage Rates
While mortgage rates have remained high throughout 2024, their rise in recent months has attracted considerable media attention. That is because rates continued to climb even as the Federal Reserve cut its key interest rate by 75 basis points since September. It is thought that the federal funds rate and mortgage rates move in tandem, though this relationship is both relatively new and needs to be better understood.
Many factors determine mortgage rates, including the interest rates on US treasury bills. Mortgage rates more closely follow the 10-year Treasury bond yields. Treasury yields rise for many reasons but the rise over the last several months has been attributed to bond market expectations that the incoming Trump administration’s economic plans will increase the federal deficit and be inflationary.
Since late November, the 30-year mortgage rate has decreased slightly to 6.69%. While historically high, this is below the 7% mark, which is believed to be a crucial threshold beyond which demand for mortgages drops precipitously.
Declining Private Sector Jobs Growth
Private sector job growth slowed continuously across 2024. From its autumn 2021 peak of 700,000, the 3-month moving average has declined to barely 130,000 in November 2024. Some moderation in the labor market is to be expected after a strong recovery from the pandemic. That natural trend, however, does not wholly explain a simultaneous decline in the employment diffusion index. This is a measure of overall job gains utilizing a scale of 0 to 100 where job gains measured at greater than 50 indicate that the majority of industries in that category added jobs.
According to this metric, certain sectors like retail are having trouble adding jobs given their lower placement on this scale. Though most sectors gained jobs over the past year, the information and manufacturing industries did not. In line with this development, the manufacturing sector’s diffusion index has declined to a record low of 32 this year.
Government and construction are particularly noteworthy sectors for job growth across the year. Construction employment has shown remarkable growth for an interest rate-sensitive industry in a high-rate environment. Private residential construction has been strong in 2024 and October witnessed the largest monthly increase in single-family construction since February. However, the incoming Trump administration’s mass deportation plan may undermine the strong employment figures of the construction sector.
Undocumented immigrants make up a sizable share of construction laborers. We may already be seeing signs that anticipation of the deportation plan is curtailing construction hiring. The industry added just 2,000 and 10,000 jobs in October and November, respectively – far below the average of 18,000 over the last 12 months.
Over the same period that private sector job gains have diminished, the government sector’s share of total employment has steadily increased, reaching its highest level since the end of 2021. During some months of 2024, the government sector accounted for anywhere between 25% to 50% of total net job gains.
Inflation
While inflation has decreased dramatically since its peak during the summer of 2022, households continue to experience hardships related to high prices. Just as inflation has changed over the years, so has the composition of inflation. Over the last couple of decades, imports and declining manufacturing costs have blunted the rise of goods inflation. The shift in the price of services, however, looks quite different.
The chart above shows the personal consumption expenditures price index, which measures the prices people are paying for goods and services. Goods accounted for the majority of unusually high inflation in 2022 and 2023. But this year saw a return of services driving inflation.
The bulk of services are in the shelter, transportation, and medical care industries. Shelter costs have been above their historical norm since 2022. Transportation service costs are up 8.2% year-over-year as airline fares and rising car insurance costs eat into household budgets. The latter has risen by 14% over the last year alone. Despite the combination of high car prices and insurance costs, sales of new cars and trucks reached the highest level in over 3 years last month, a sign that consumer spending remains robust.
Although 2024 has been a solid year for the US labor market overall, some weaknesses could spell a reversal of fortunes in 2025. Among these are declining private sector job growth and elevated mortgage rates. The strength of the economy will be tested as the incoming Trump administration will likely pursue policies that may expose the true fragility of the economy.
Joseph Dean is NCRC’s Junior Racial Economic Research Specialist.
Photo by axelas via Flickr.
