A Trump Economy? What to Watch in Friday’s November Jobs Report

November 29, 2016

This Friday, we’ll get the nation’s first update on the labor market since America’s surprising Presidential election. Here’s what we’ll be watching for in the November jobs report from the BLS:

  • 160,000 new jobs added to nonfarm payrolls in November.
  • Unemployment rate steady at 4.9 percent.
  • Average hourly wages up 2.8 percent from one year ago.
  • Labor force participation rate down slightly to 62.7 percent.

Post-Election Uncertainty
Healthy labor markets crave stability. Like any business investment, hiring is a long-term bet that is hard for companies to unwind if plans change. For this reason, an economy facing the uncertainty that comes with a new administration has the potential to dampen job growth.

On the campaign trail, candidate Trump made many promises: to restrict immigration, reduce international trade, repeal the Affordable Care Act health care law, reform the federal tax code and more.

Each of these policies has the potential for dramatic effects on the labor market—some positive, some negative, and some neutral. The key to how they will affect our economy lies in the details of those policies, which we have little of before President-elect Trump enters the White House in January.

What Do Policy Changes Mean for the Labor Market?
It’s hard to predict what policies we’re likely to see enacted under a Trump administration. Some campaign promises don’t translate into law. However, research shows most presidential campaign promises are ultimately kept—since 1968 presidents have successfully enacted 67 percent of campaign plans. By that measure, many policy changes are likely on the way for America.

What might Mr. Trump’s proposed policy changes mean for the labor market? It’s too early to say for sure—the details of legislation matter—but there are some general themes most economists agree on.

For one, immigration plays a key role in the U.S. labor market. Low-skilled immigration fuels construction and building trades, and high-skilled immigration drives tech and finance. There are cost and benefits of immigration, but economists overwhelmingly agree immigration is a net positive to the U.S. economy. It’s a key driver of innovation and entrepreneurship. And any sharp drop in immigration would almost certainly be harmful overall to the U.S. economy long-term.

Similarly, international trade has become politically controversial in recent years, but economists are largely in agreement that freer trade has powerful economic and social benefits to the U.S. Just as a sharp drop in trade between California and New York would be harmful to the economy, policies that cut international trade will harm workers at the ports, airlines, tourism, and any sector that relies heavily on imported or exported components. Which, in today’s highly integrated global economy, is nearly every U.S. industry.

Despite the uncertainty in markets today, the good news is that our massive $18 trillion U.S. economy has tremendous momentum. The incoming Trump administration will inherit a stable and growing U.S. economy, with the strongest overall labor market in a generation. As of the end of November, we’re 89 months into the current expansion, just three months short of the famous 1980s boom-years expansion. And as of today, there are few signs of a slowdown in sight.

Fed Interest Rates
One wildcard for the labor market is the Federal Reserve’s upcoming December meeting of their interest rate setting committee. Currently, the Fed Funds target rate stands at 0.25-0.50 percent. Based on rising wage growth and continued strength in the labor market, most economists expect the Fed will raise rates by 0.25 percent at the December meeting.

As of late November, the implied probability of a December rate according to futures markets is 98.2 percent—a near certainty. In response, mortgage rates are up sharply over the past month, suggesting markets have already begun pricing in the likelihood of a December rate hike.

The Wage Picture
With unemployment rates near 3 percent in many cities and near-record numbers of unfilled jobs, it’s no surprise that more workers are in a strong bargaining position today.

Our November Glassdoor Local Pay Report shows median U.S. pay growth of 3.1 percent from a year ago—the fastest pace in more than four years of Glassdoor data. Wages grew fastest in Los Angeles (4.3 percent) and San Francisco (4.0 percent), while pay growth continued to lag behind in Houston (1.0 percent)—a metro hit hard by tough times in the U.S. oil and gas industry. The Glassdoor Local Pay Reports provide real-time view of wage growth in metro areas across the U.S. based on millions of salaries shared on Glassdoor. Leveraging the same technology and data science behind Glassdoor’s Know Your Worth product, the Local Pay Reports apply a proprietary machine learning algorithm to estimate median base pay by job title, industry and employer size. Read more trends and insights into today’s wages by metro area and job title here.

In Friday’s jobs report, we expect to see year-over-year growth in average hourly earnings of about 2.8 percent—roughly the same pace as last month. That’s slightly below the 3.1 percent pay growth we’re seeing in the Glassdoor Local Pay Report, but on a clear upward trend as employers compete for talent in today’s robust job market.

To speak with Dr. Andrew Chamberlain about this month’s jobs report or labor market trends, contact pr [at] glassdoor [dot] com. For the latest economics and labor market updates, subscribe to email alerts here and follow @adchamberlain.