Job Growths In November Disappoint, But There Are Still Hopefuls

Eric S Burdon

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With the economy in the state that it's in, the US economy created fewer jobs than what people were expecting. It's a clear sign that hiring has slowed down due to the Omicron variant spreading slowly across the country.

Getting into the numbers, the increase of nonfarm payrolls only increased by 210,000 for this month. Even though the increase in jobs wasn't the greatest, the unemployment rate dropped by 0.4% to 4.2%. This is on top of the labor force participation rate increasing in November to 61.8%. That number is the highest level it has been since March 2020.

Why the increase in jobs last month was disappointing for many was because the Dow Jones estimated that about 573,000 new jobs would've been created and that the jobless level would be about 4.5%. This was in light of the chronic labor shortage.

In reality, we got those results as well as a more encompassing measure of unemployment. That measure includes discouraged workers plus part-time workers dropping to 7.8%.

A Tale Of Two Surveys

Even though things seem glum, a survey of households shows more hope in employment overall with a survey showing employment gain of 594,000 for November.

Economists are saying the entire report is a tale of two surveys.

The survey conducted for households are showing fast employment gains, people returning to work, and lower levels of involuntary part-time jobs.

On the other side is the payroll survey that's showing that job growth as a whole is decelerating. You're seeing that trend even more in areas where COVID would be more involved.

All in all, it creates a situation where the labor market itself is looking strong, however, there are still a lot of uncertainty which is to be expected.

Again, you can see that in workplaces where COVID could be a bigger factor. For example, the leisure and hospitality industry - which includes bars, hotels, restaurants and similar businesses - had an increase of 23,000 jobs.

It's nice especially since the sector has recovered from the nearly 7 million jobs lost once the pandemic started. Despite that though, it's still below by 1.3 million from its February 2020 level. This is on top of the unemployment rate still being stuck at 7.5%

Promising Developments

Even amongst the uncertainty, jobs seem to be on the up and up. Over the past few months, there have been substantial revisions in months where low counts were predicted having to bump to higher numbers.

In October and September for example, a combined 82,000 jobs were in excess of what was predicted for those months initially.

In November alone, the biggest gains of jobs were in:

  • Professional and business services (90,000)
  • Transportation and warehousing (50,000)
  • And construction (31,000)

This is on top of the shortage of retail jobs getting a dip of 20,000 loss though government added 10,000 jobs to the total.

Furthermore, worker wages increased this month rising by 0.26% in November. This is a 4.8% increase from where it was last year, though both numbers were slightly below economists estimates.

Feds Ready To Change Policy

Policymakers have also been watching the employment figures quite closely as well in order to gauge when the economy is recovering from the depths of the pandemic. After all, the US suffered its shortest but steepest recession in the early days of Covid-19. Since then it was on a progressive but volatile path ever since.

The Federal Reserve has stated it'll put a new wrinkle into the picture this week since measures they put in to support growth could be stopping much sooner than anticipated.

This wrinkle gets worse when Fed Chairman Jerome Powell stated he'd be stepping up the tapering levels in monthly bond purchases. What this means for us is that interest rates may start to hike back up.

Paired with the discovery of inflation being stronger and more durable than expected, policymakers are looking to be changing policy.

Their reasoning is further grounded in the fact that interest rate hikes will likely be pulled forward in 2022. In fact, markets are expecting that the Fed will enact at least two quarter-percentage-point increases in 2022. This is on top of the Fed President James Bullard adding that the economy is measured by GDP has now recovered completely and can operate with far less policy than it has right now. This is especially considering the pace that inflation is running.

These considerations and the case of jobs we saw in November suggest that removing monetary policy accommodation would be wise to do.

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