The U.S. job market is still tight, and job growth probably slowed down again in November.

As fears of a recession grew, job growth in the U.S. probably slowed to its lowest level in almost two years in November. This could give the Federal Reserve the confidence to start slowing the rate of interest rate hikes this month.

The Labor Department’s employment report on Friday will be closely watched, and it is expected to show that wage growth slowed down again last month. This comes after news on Thursday that inflation slowed down in October.

But the job market is still tight. In October, there were 1.7 job openings for every unemployed person. This means that the Fed will continue to tighten money until at least the first half of 2023. The strength of the labour market is also one reason economists think a recession next year will be short and mild.

Related: The CEO of Amazon says job cuts will continue into the following year.

“It’s good news, but not really great news.” “The job market remains tight and strong,” said Argon Nicaj, an American economist at MUFG in New York.”The Fed might slow down the rate at which it raises interest rates, but it is not at a point where it will stop raising rates altogether.”

A Reuters poll of economists predicts that the survey of business establishments will show that nonfarm payrolls grew by 200,000 jobs last month. This is the lowest number since December 2020, when they grew by 261,000. The range of guesses was from 133,000 to 270,000.

The Reuters poll, on the other hand, was done before a report from the Institute for Supply Management came out on Thursday. That report said that manufacturing shrank in November for the first time in 2 1/2 years, and a measure of factory employment fell sharply. Some economists changed their predictions for November jobs because of this.

The household survey, which is used to figure out the unemployment rate, showed that 328,000 jobs were lost in October. Economists said that this could have an effect on the employment count for November.

This year, the average number of jobs added each month was 407,000, but in 2021, that number will be 562,000. Fed Chair Jerome Powell said on Wednesday that the U.S. central bank could slow down its rate hikes “as soon as December.”

The Fed meets on December 13 and 14. As a way to fight high inflation, the Fed has raised its policy rate by 375 basis points this year, from near zero to a range of 3.75%–4.00%. This is the fastest rate-hiking cycle since the 1980s.

The right size for companies

Economists said that it was mostly big companies that had slowed down on hiring. Thousands of jobs are being cut at tech companies like Twitter, Amazon (NASDAQ: AMZN), and Meta, which is the parent company of Facebook (NASDAQ: META).

Economists said these companies were getting back to the right size after hiring too many people during the COVID-19 pandemic. They said that small businesses still needed workers very badly.

At the end of October, there were 10.3 million open jobs. Many of them were in the leisure and hospitality, healthcare, and social assistance industries.

Brian Bethune, an economics professor at Boston College, said, “It won’t be the S&P 500 companies that drive job growth.” Instead, it will be the small business sector.

The unemployment rate is expected to stay at 3.7%, which is in line with the fact that the job market is still tight. The average hourly wage is expected to have gone up by 0.3% after going up by 0.4% in October. That would bring the annual rise in wages down from 4.7% in October to a still-high 4.6%. In March, wage growth peaked at 5.6%.

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Sam Bullard, a senior economist at Wells Fargo (NYSE:WFC) in Charlotte, North Carolina, said, “This pace is uncomfortably high for the Fed and not in line with the 2% inflation target.” However, Fed officials may find some comfort in the fact that the annual rate has been going down over the past eight months.

The personal consumption expenditures (PCE) price index went up 5.0% year-over-year in October, after going up 5.2% in September. This was after taking out the volatile food and energy components.

The wage increases are making it easier for consumers to deal with the inflation storm. This keeps the economy growing steadily and gives cautious hope that the country might not have to go through a recession after all.

“I still think the economy will fall into a short, shallow recession around the middle of 2023, based on the slowing growth of the labour market,” said Steven Blitz, chief U.S. economist at TS Lombard in New York. “However, the chance that there won’t be a recession is now higher.”