Why slower hiring in November isn’t necessarily a bad thing

The U.S. economy added 155,000 jobs in November and the unemployment rate held steady at 3.7 percent, the lowest on record since 1969.

Wages rose at the same pace as the month before–81 cents. Overall, they’ve risen 3.1 percent over the past 12 months. That growth rate slightly outpaces inflation, which has increased 2.5 percent over the last year.

The October jobs numbers were revised downward from 250,000 to 237,000, and September’s numbers were revised up slightly to 119,000.

Here are key takeaways from November’s job report.

The hiring slowdown

Economists have anticipated a slowdown in hiring because fewer workers are available with such a low unemployment rate. But the drop in hiring shouldn’t be a cause for alarm, said Dan North, the chief economist at Euler Hermes North America.

The report “is a little soft, but I don’t think there is a whole lot to be worried about here,” North said.

The stock market has dropped 7 percent since October, largely on worries over the Federal Reserve’s interest rate hikes and the trade war with China. But the broader economy is still on stable footing, North and others argue.

GDP growth is strong, the unemployment rate is low, and wages are ticking up, albeit slowly.

What’s holding back wage growth?

The lack of strong wage growth has stumped economists for some time.

“It is a little disappointing that wages continue to remain near flat and we aren’t seeing the gains associated with demand,” said Amy Glaser, the senior vice president of the temporary staffing firm Adecco USA. “It continues to defy the law of economics with supply and demand.”

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Glaser attributed the somewhat stagnant wages to employers’ fears of another economic downturn. Employers do not want to commit to higher wages if things take a turn for the worse, Glaser said.

So instead many companies are trying to attract workers by improving company culture and providing more vacation time, among other benefits.

What the jobs numbers mean for interest rates

The fact that wages have not spiked could be good news for the economy at large, because it means the Federal Reserve is less likely to aggressively raise interest rates in 2019.

The central bank is still on track to raise interest rates this month, but Chairman Jerome Powell signaled last month that it might pause interest rate hikes in the new year.

President Donald Trump has repeatedly criticized Powell in recent months for raising interest rates, a move the president thinks could stall the economic growth. Powell has said the Federal Reserve will continue to operate outside of political pressure.

A look ahead to the new year

Overall, the economy looks like it has performed well this year, adding on average 209,000 jobs per month.

“The economic expansion has probably outlasted many expectations, and the good news is, it still is rolling right along,” said Mark Hamrick, a senior economic analyst at Bankrate.com.

But heading into the new year, the economy is likely to cool down slightly as the boost from the income tax cuts wear off.

Hamrick said investors and workers should do what they can to prepare themselves for a downturn, by taking steps like keeping up their professional networks and putting money in savings.