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Job growth in November was expected to have slowed but remained strong, even in the face of layoffs and job freezes at major companies.

The economy is expected to have added 200,000 jobs, down from October’s 261,000, according to Dow Jones. Economists forecast the jobless rate held steady at 3.7% and average wage growth slowed to 0.3% month-on-month from 0.4% in October.

The monthly jobs report is released Friday at 8:30 a.m. ET and comes in the spotlight as the Federal Reserve worries that the boiling labor market and rising wages are helping to fuel the ‘inflation. The Fed is expected to raise interest rates for the seventh time, by half a percentage point, at its next meeting on Dec. 14.

Economists expect the Fed’s tighter monetary policy to eventually result in negative payroll numbers, but not yet.

“There is more likely a downside surprise” for the November report, said Diane Swonk, chief economist at KPMG. She said the number of workers absent due to illness could continue to be a factor, and there have been more hiring freeze announcements.

Retail is generally a bright spot in November, but Swonk said there are signs the industry isn’t growing as much as it normally would this holiday season.

“On a seasonally adjusted basis, there would be less seasonal hiring for online retail and some of the larger retailers and discounters who worry about their margins over the holiday season,” Swonk said. “The same is true in the shipping industry.”

Weak tech workforce

Companies like parent Facebook Metaplatforms and HP lay off workers and others, such as Alphabet, slow or freeze hiring. Although the pace of these announcements has picked up as the end of the year approaches, economists say they are not yet affecting jobs data significantly.

“Pent-up demand in the US economy continues to direct some of these workers to other sectors of the economy,” said David Page, head of macroeconomic research at AXA Investment Managers. “As a result, overall job growth has been solid. Retail should do well, but I think there’s a big question about how retail is doing post-holiday.”

Tom Gimbel, founder of staffing firm LaSalle Networks, said his annual survey of 300 hiring managers showed 84% expected to add workers in 2023, but not as many. “Consumer packaged goods, traditional manufacturing and professional services companies continue to hire. IT continues to be the leader, and we see accounting and finance are above 2021 numbers. Sales hires have also increased a lot,” he said.

But big tech and venture capital firms aren’t hiring as much or downsizing, he added.

“You have two areas that are affected, big tech companies and unprofitable tech companies. The middle slice of tech is healthy,” Gimbel said.

Michael Gapen, chief US economist at Bank of America, predicts that 225,000 above consensus jobs were added in November.

“There should be a directional slowdown, but we expect a fairly good number of jobs,” he said. “What I will be looking for are signs that interest rate sensitive sectors are starting to experience job losses.”

Gapen said it will monitor construction to see if there are any job losses in that area, as well as in other sectors that could be affected by the housing downturn.

The Federal Reserve raised its federal funds rate target range to 3.75% to 4%, and economists expect the Fed to hit around 5% before halting in the first part of 2023 Economists say the Fed is expected to hike half a percentage point this month, even though November’s jobs report is stronger than expected.

If payrolls don’t decline from the 260,000-per-month pace, “over the next few months the Fed will have to push through more tightening than the market expects,” Page said. He said November’s data could have implications for the trajectory of future tightening if it’s entirely off the mark, either way.

Fed Chairman Jerome Powell, in a major Labor address on Wednesday, said the economy only needed to add 100,000 jobs a month to keep pace with population growth.

“Currently, the unemployment rate is 3.7%, near its lowest level in 50 years, and job openings exceed available workers by about 4 million, or about 1.7 job openings per every person looking for a job,” Powell said.

The Fed chairman also spoke of a structural shortage of workers, ranging from factors such as retirements during the pandemic to a sharp drop in immigration. He also noted that the pace of job growth has slowed with the economy, from 450,000 a month in the first seven months of this year to around 290,000 in the last three months.

“Powell gave us an interesting direction,” AXA’s Page said. “The Fed needs to get it below 100,000…Anything above and you add tightness. Anything below, and you dampen tightness.”

Page expects the Fed’s rate hikes to weigh on the economy and slow the labor market, forecasting negative payrolls numbers and a “mild” recession in the first half of next year.

Swonk also expects payrolls to contract in the coming months, and there should be signs of a slowdown in the November report.

“It’s getting colder and that’s good, but it’s still misaligned. There are still 1.7 jobs open for every job seeker,” Swonk said.