U.S. Jobs: Despite Optimism, November Numbers Disappoint
An up-and-down, or off-again-on-again pattern appears to be emerging in the labor markets. Despite consensus forecasts for November job creation of 500,000 jobs or more, the latest U.S. Bureau of Labor Statistics report comes in at a paltry 210,000 jobs added. That's on par with the original report from September, which came in at under 200,000 (but was later revised substantially upward to 312,000).
In fact, September's numbers were revised upward again to 379,000 and for October from 531,000 to 546,000. That makes the current quarter's monthly average a bit less scary at just over 378,000. But it looks like oscillation is where the jobs numbers are at for the moment.
The cyclical rising and falling makes one wonder which way the mop will flop for December, what with Delta surging and Omicron making its U.S. debut as I write this story.
Looking at the November Jobs Report
Before I go into some ruminations, an interesting contradiction, and some analysis, let's review what is contained in the latest U.S. BLS Employment Situation Summary. On the one hand, it reports low new jobs added. On the other hand, it reports a 0.4 point fall in the unemployment rate to 4.2 percent (which is actually fairly healthy, from a long-term historical perspective).
That puts the report's estimate of total U.S. unemployment at 6.9 million, a reduction of 542,000 on the negative side of the ledger. Why then, does the report show only 210,000 jobs created for November? That's the interesting contradiction, which I will discuss in a moment under the heading "A Tale of Two Surveys."
Now for some details from the EmpSitSum (Employment Situation Summary) as it's sometimes abbreviated. Overall, jobs were gained in professional/business services, transportation and warehousing, construction, and manufacturing, while retail trade jobs dropped (unusual for November, traditionally a ramp-up and active month during the holiday shopping season).
The Establishment Survey Data in this report recites where jobs were gained and lost for November. Here's a summary:
Professional and business services gained 90,000 jobs in November, of which 42,000 came in administrative and waste services, 12,000 in management and technical consulting services, and 10,000 in computer system design and related services, with an additional 6,000 bump for temporary help services. This sector is inching toward pre-pandemic parity, and is only 69,000 down from February 2020 levels.
Transportation and warehousing added 50,000 jobs in November. It is truly a growth sector, and has actually risen above its February 2020 job count. Of the jobs added for the month, 27,000 were in couriers and messengers, and another 9,000 in warehousing and storage.
Construction added 31,000 jobs for November, in line with growth for September and October. Growth elements included 13,000 for specialty trade contractors, 10,000 for building construction, and 8,000 for heavy and civil engineering construction. This sector remains down by 115,000 jobs from February 2020 levels, but will surely grow now that the infrastructure bill has been signed into law.
Manufacturing added 31,000 jobs in November. That includes gains of durable goods manufacturing of 10,000 and fabricated metal products of 8,000, offset by motor vehicles and parts losses of 10,000, while a strike in machinery/machinist jobs brought losses of 6,000. This sector is down by 253,000 jobs vis-�-vis February 2020.
Financial services added 13,000 jobs for November, with most of that growth (9,000) in securities, commodity contracts and investments. This sector is also up from February 2020 levels, but by a more modest 30,000 jobs.
Retail trade lost 20,000 jobs in November, with 20,000 from general merchandise stores, 18,000 from clothing and accessories stores, and 9,000 from sporting goods, hobby, book and music stores. These losses were partially offset by 9,000 jobs added in food and beverage stores, and 7,000 added in building material and garden supply stores. Overall, the sector's employment levels remain down by 176,000 since February 2020.
Leisure and hospitality added a modest 23,000 jobs, and is down by 1.3 million jobs compared to February 2020. It remains hostage to reduced face-to-face interaction since the pandemic came into play.
Healthcare employment is most unchanged with 2,000 jobs added. The sector is down by 450,000 jobs vis-�-vis February 2020.
Other sectors — namely mining, wholesale trade, information, other services, and public and private education — were mostly unchanged for November.
To me, this shows a picture of widespread if slow or modest growth across many sectors, and a continuation of the post-pandemic recovery albeit one that's somewhat diminished over the two preceding months. I don't think this spells trouble, per se. It's either another hiccup (as September proved to be) or it's the first step on a downward path. Alas, only time will tell.
A Tale of Two Surveys: Establishment vs. Household
This month's U.S. BLS report includes a fascinating section titled "Coronavirus (COVID-19) Impact on November 2021 Household and Establishment Survey Data." It explains that data collection for each of these surveys is subject to pandemic-related effects. On the one hand, the household survey is subject to classifying workers "unemployed on temporary layoff ... misclassified as employed but not at work."
In part, therefore, this accounts for the mismatch between jobs added in the establishment survey (+210,000 for November) and reductions in unemployment in the household survey (+542,000). Interestingly, that latter number is much more in line with economists' prior forecasts for the establishment number, and in keeping with the year-to-date monthly jobs growth average as well.
This could account for 0.1 percent of the unemployment reduction reported for November, according to a recent U.S. BLS FAQ on Pandemic Effects. But the difference between the two surveys is 332,000 jobs, which is substantial and puzzling.
One more thing: The last two weeks' numbers for first-time claims for unemployment have been especially low. Two weeks ago, that number came in at around 194,000, which is as low as that number has been since the pandemic got underway — in fact, it's the lowest such number recorded since 1969! Last week's 222,000 number was also low by recent standards.
Together, both data points suggest that unemployment rates are quite low, as they reflect employed workers transitioning into unemployed status. This recovery is clearly involving changes in the labor market, as workers respond to perceived risks and chances for higher-paying "other jobs" by leaving current jobs, to take up or look for high-paying, less-risky jobs in other parts of the labor market.
My gut feel is that the difference between the household survey and the establishment survey also incorporates an increasing number of self-employed and gig workers who may have left W-9 jobs for less formal forms of work. In other words, they may not yet be on the establishment survey's radar.
Where Do We Go From Here?
Good question! A lot depends on what happens with the ongoing Delta surge and the impact of Omicron as they affect the economy and the job market. There's no doubt that the labor market may stall out and stand pat as those impacts make themselves felt. Whether this means simply marking time in the same position for a while, or actually taking one or more steps back, remains to be seen.
I'm cautiously optimistic, and hopeful that 2022 will see accelerating growth and a continuing return to normal. We'll see. Stay tuned for next month's thrilling report as we learn whether or not the see-saw is moving up or downward on the jobs end.