This morning’s update on payrolls for November confirms what was already obvious: employment growth is slowing.
The economy created 94,000 net new jobs last month, the Labor Department reported. Yes, there have been months with lesser gains, such as September’s sluggish 44,000 rise, although compared with the last few years it’s hard to get excited about 94,000 new jobs in a labor force of nearly 154 million.
But rather than focusing on any one month, consider the larger trend. As our chart below illustrates, there’s no mistaking the slowdown in the jobs creation machine.

The only question is the magnitude and duration of the deceleration and whether it deteriorates into outright job losses. In the previous downturn in 2000-2003, the economy at one point was shedding in excess of 300,000 jobs a month. We’re a long way from such levels of pain. In fact, the steep monthly losses the last time was in large part related to the bursting of the tech bubble. This time, the labor market’s leaner and meaner and so the prospect of a sudden collapse in employment creation looks unlikely. Then again, it’s not fully clear how the headwinds from the real estate correction and other problems will unfold next year.
The good news is that the unemployment rate continues to hold steady at 4.7%. In fact, the jobless rate hasn’t been over 5.0% since late 2005.
Nonetheless, we expect that the slowdown in jobs creation will progress through at least Q1 2008. The cycle is turning and, given the size of the U.S. labor market, cyclical turns are generated for broad and deep economic reasons. Momentum, in short, usually has the upper hand with macro trends that affect the labor market. The Fed seems inclined to agree, or so another rate cut at next Tuesday’s FOMC meeting would suggest.