The US economy created far fewer jobs than expected in November, in a sign that hiring started to slow even ahead of the new coronavirus Omicron variant threat, the Labor Department reported on December 3. Nonfarm payrolls increased by just 210,000 for the month, though the unemployment rate fell sharply to 4.2% from 4.6%, even though the labor force participation rate increased for the month to 61.8%, its highest level since March 2020. The Dow Jones estimate was for 573,000 new jobs and a jobless level of 4.5% for an economy beset by a chronic labor shortage. A more encompassing measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons dropped even more, tumbling to 7.8% from 8.3%. The household survey painted a brighter picture, with an addition of 1.1 million jobs as the labor force increased by 594,000.
“This report is a tale of two surveys,” said Nick Bunker, economic research director at jobs placement site Indeed. “The household survey shows accelerating employment gains, workers returning to the labor force, and low levels of involuntary part-time work. The payroll survey shows a significant deceleration in job growth, particularly in COVID-affected sectors.” “The underlying momentum of the labor market is still strong, but this month shows more uncertainty than expected,” he added. Leisure and hospitality, which includes bars, restaurants, hotels, and similar businesses, saw a gain of just 23,000 after being a leading job creator for much of the recovery. Though the sector has regained nearly 7 million of the jobs lost at the depths of the pandemic, it remains about 1.3 million below its February 2020 level, with an unemployment rate stuck at 7.5%.
Following the disappointment, markets initially shrugged off the numbers but then turned negative after the open. Initial jobs tallies this year have seen substantial revisions, with months showing low counts initially often bumped higher. The October and September estimates were moved up a combined 82,000 in the report. Sectors showing the biggest gains in November included professional and business services (90,000), transportation and warehousing (50,000), and construction (31,000). Even with the holiday shopping season approaching, retail saw a decline of 20,000. The government lost 25,000 jobs. Worker wages climbed for the month, rising 0.26% in November and 4.8% from a year ago. Both numbers were slightly below estimates.
Policymakers have been watching the employment figures closely to gauge how close the economy is to a full recovery from the depths of the pandemic. The US suffered its shortest but steepest recession in the early days of the coronavirus pandemic in March and April of 2020 and has been on a progressive but volatile path since. Federal Reserve officials put a new wrinkle into the picture this week when they indicated that the measures they instituted to support growth could be coming to an end sooner than expected. In congressional testimony earlier in the week, Fed Chairman Jerome Powell said he expects the central bank’s policy committee to discuss at its meeting this month stepping up the level at which it is tapering its monthly bond purchases. Powell said he sees the unwinding to conclude “a few months” sooner than expected, a move that would open the possibility for interest rate hikes.
“The disappointing 210,000 gain in non-farm payrolls in November suggests the labor market recovery was faltering even before the potential impact of the new Omicron variant, possibly as a result of the rising infection rates in the Northeast and Midwest,” wrote Andrew Hunter, senior US economist at Capital Economics. “Nevertheless, the Fed will still push ahead with its plans to accelerate the pace of its QE taper at this month’s FOMC meeting.” St. Louis Fed President James Bullard commented on the jobs numbers upon their release, saying the economy as measured by GDP has recovered fully and can operate with less policy stimulus, particularly considering the pace at which inflation is running. “These considerations suggest, on balance, that the Federal Open Market Committee should remove monetary policy accommodation,” Bullard said.