Momentum Slows in the Job Market
Employment Growth Comes in Below Expectations
For the fifth month in a row, the labor market recovery slowed. The U.S. added 245,000 jobs in November, an overall increase of jobs, but nearly 365,000 fewer jobs than were added in October. The labor market continues to struggle to recover from the COVID recession. While economic prospects look good several months in the future, the economy will continue to struggle in the short-term.
Top Takeaways from the Report
In November, the U.S. economy continued to add back jobs that were lost in the spring. Unfortunately, once again, the job growth slowed from the previous month. The U.S. labor market added 245,000 jobs in November. This is down from the previous month’s job growth of 610,000 and is significantly below the consensus forecast that 500,000 jobs would be added in November. If the labor market were to continue growing at the same rate from November it would take another 40 months or over 3 years to get back to the pre-crisis employment level.
A normally positive indicator is that the unemployment rate dropped from 6.9% in October to 6.7% in November. However, labor force participation also dropped in November to 61.5%, from 61.7% in October. A declining labor force participation rate indicates that people are once again leaving the labor force as employment prospects dim.
Another sign of labor market weakness is the increase in long-term unemployment. A person is considered to have been unemployed for a long period if they have been out of work for 27 weeks (roughly 6 months) or more. As of November, 3.9 million people are considered long-term unemployed, roughly 57% of the Great Recession peak of 6.8 million people recorded in April 2010. The increase in long-term unemployed persons will further constrain future economic growth as these potential workers lose the skills and connections necessary to succeed in the job market.
The continued surge of the Coronavirus pandemic is weighing down potential economic growth. Several states have announced new rounds of lockdowns and business restrictions, which is holding back economic activity and preventing a recovery. The labor market still needs to add back around 9.9 million jobs to return to pre-recession employment levels.
Growth by Industry
Industry-level employment changes in November reflect the divergent circumstances facing different sectors, with job gains in transportation and warehousing, professional and business services, and health care, and job losses in government and retail trade.
Employment in transportation and warehousing increased by 145,000 in November and is now 123,000 below its February level. The professional and business services sector also experienced strong job growth last month, gaining 60,000 jobs in November. Other notable growth industries included health care (+46,000), construction (+27,000), manufacturing (+27,000), and financial activities (+15,000).
On the other side, government employment continued its multi-month declines, losing 99,000 jobs in November. However, most of these jobs lost (93,000) were due to the loss of temporary Census workers. The loss of 35,000 jobs in retail trade is much more concerning. Retail employment often rises during the holiday season but is being constrained by lower consumer spending and the shift to online shopping.
Employment in leisure and hospitality increased slightly by 31,000 jobs in November, but is still down by 3.4 million jobs since February.
The Bottom Line
Gray Clouds Remain
The U.S. economy is in a difficult position right now. With the rollout of a COVID vaccine there is renewed hope that economic growth could accelerate by mid-2021. However, the current environment of peaking coronavirus cases and increased lockdown restrictions will continue to constrain the economy. Without more federal stimulus support, the current slowing job market could once again contract, pulling the economy into a “double-dip” recession.
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