U.S. businesses added a robust 190,000 jobs in November as the job market maintained a solid pace of growth amid tightening labor conditions, a private survey showed on Wednesday.
The pace of hiring last month slowed from October’s 235,000 jobs after a surge of activity followed a sharp drop in jobs due to the hurricanes that slammed into Texas and Florida, according to data released by payroll processor ADP.
Job growth fell to 96,000 in September when the storms disrupted the labor market.
But the labor market got back on track in November.
{mosads}”The job market is rip-roaring,” said Mark Zandi, chief economist of Moody’s Analytics who works with ADP to analyze the data.
“It would take an awful lot to derail it at this point,” Zandi said.
The biggest potential change to the labor market’s consistent growth is the prospect that Congress will pass tax legislation this year, which could lead to a modest increase in economic growth and an even stronger expansion of the labor market in 2018, Zandi said.
But rapid job growth also increases the chances that the labor market will exceed its boiling point.
“We’re not there yet,” Zandi said.
“But there is a mounting threat that the job market will overheat next year,” he said.
While arguing that the economy should be allowed to “run hot” Zandi said that increases the risk of another recession.
All 10 recessions since World War II have been preceded by over-heated growth, Zandi said.
“We don’t want to go down the same path we’ve done every single time and push this economy back into recession,” he said.
“We just want an economy that runs hot but doesn’t overheat. That balance wasn’t really an issue until now.”
The 4.1 percent unemployment rate is consistent with an economy that is at or has moved beyond full employment, Zandi said.
Next year the jobless rate will likely fall below 4 percent, creating even tighter labor market conditions that could drive up wages at a faster rate, push up inflation and spur the Federal Reserve to raise interest rates at a quicker pace, a move that could slow economic growth.
In the past year, wage growth has finally started to pick up and could finally head north of 3 percent by the middle of next year as the labor force tightens further, Zandi said.
“As the labor market continues to tighten and wages increase it will become increasingly difficult for employers to attract and retain skilled talent,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute.
The Labor Department is scheduled to release their figures on Friday with a forecast for about 200,000 jobs. The unemployment rate is expected to hold at 4.1 percent, a 17-year low.
The ADP report showed that manufacturers added a solid 40,000 jobs last month, the most this year, behind an improving global economy that is increasing demand for U.S. exports.
Education and health services added 54,000 jobs, and the hospitality industry, which includes restaurants and hotels, added 25,000 positions.
Medium-sized businesses — those with between 50 and 499 employees — outpaced jobs growth at smaller and larger companies, hired 99,000 people last month.
The only soft spots are in industries being disrupted by technology, including brick-and-mortar retailing, Zandi said.