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

The economy is expected to have added 200,000 jobs, less than the 261,000 in October, according to Dow Jones. Economists forecast the unemployment rate was steady at 3.7%, and average wage growth slowed to 0.3% month-over-month, from 0.4% in October.

The monthly employment report is released Friday at 8:30 a.m. ET, and is in special focus since the Federal Reserve has been concerned that the hot labor market and rising wages have been helping fuel inflation. The Fed is widely expected to raise interest rates for a seventh time, by a half percentage point, at its next meeting Dec. 14.

Economists expect the Fed’s tighter money policy will ultimately result in negative monthly payroll numbers, but not yet.

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

Retail is typically a bright spot in November, but Swonk said there are signs the industry is not ramping up as much as it normally might this holiday season.

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

Tech labor weakness

Companies like Facebook parent Meta Platforms and HP are laying off workers and others, like Alphabet, are slowing or freezing hiring. While the pace of those announcements has picked up as the year end approaches, economists say they are not yet affecting the jobs data in a significant way.

“The pent-up demand in the U.S. economy is continuing to funnel some of those workers to other areas of the economy,” said David Page, head of macroeconomic research at AXA Investment Managers. “As a result, the overall employment growth has been solid. Retail should do okay, but I think there’s a big question of how retail performs after the holidays.”

Tom Gimbel, founder of recruiting firm LaSalle Networks, said his annual survey of 300 hiring managers showed 84% expect to add workers in 2023, but not as many. “Consumer package goods, traditional manufacturing, professional services firms are continuing to hire. IT continues to be the leader, and we see accounting and finance is above 2021 numbers. Sales hiring increased a lot as well,” he said.

But big tech and venture capital backed firms are not hiring as much, or are reducing workforces, he added.

“You’ve got two areas that are hit, big technology companies and unprofitable tech companies. The middle band of tech is healthy,” said Gimbel.

Michael Gapen, Bank of America chief U.S. economist, forecasts that an above consensus 225,000 jobs were added in November.

“There should be directional slowing, but we’re expecting a pretty good employment number,” he said. “What I will look for is signs that the interest rate sensitive sectors are starting to have some job losses.”

Gapen said he will be watching construction to see if there are job losses in that area, as well as other sectors that could be hurt by the slowdown in housing.

The Federal Reserve has raised its target fed funds rate range to 3.75% to 4%, and economists expect the Fed to reach about 5% before stopping sometime in the first part of 2023. Economists say the Fed should raise by a half percentage point this month, even if the November jobs report is stronger than expected.

If payrolls don’t come down from the 260,000-a-month pace, “over the next few months, the Fed is going to have to deliver more tightening than the market expects,” said Page. He said the November data could have implications for the path of future tightening if it is much out of line, in either direction.

Fed Chairman Jerome Powell, in an important speech on labor Wednesday, said the economy needs only to create 100,000 jobs per month to accommodate population growth.

“Currently, the unemployment rate is at 3.7 percent, near 50-year lows, and job openings exceed available workers by about 4 million — that is about 1.7 job openings for every person looking for work,” Powell said.

The Fed chairman also discussed a structural shortfall of workers, 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 per month in the first seven months of this year to about 290,000 in the past three months.

“Powell gave us an interesting steer,” said AXA’s Page. “The Fed needs to get it below 100,000…Anything above that and you’re adding to the tightness. Anything below that, and you’re easing the tightness.”

Page expects the Fed rate hikes to take a toll on the economy and slow the labor market, forecasting negative payroll numbers, and a “modest” recession in the first half of next year.

Swonk also expects payrolls to contract in the next several months, and there should be some signs of slowing in November’s report.

“It’s cooling and that’s good, but it’s still out of alignment. There are still 1.7 jobs open for every job seeker,” said Swonk.