November jobs report shows clear, virus-related slowing

December 4th, 2020 at 3:54 pm

Payrolls were up 245,000 last month, the slowest month for job gains since the jobs recovery began in April. The jobless rate fell from 6.9 to 6.7 percent, but this was due to a decline in labor market participation, not more jobs (in the households survey from which the unemployment rate is drawn, employment fell). Job changes in virus-affected sectors, like restaurants (down 17,000 jobs), suggest that the spiking virus caseload is hurting job growth. 

Overall, as the figure shows, payrolls remain 9.8 million jobs down from their pre-recession peak. If the pace of gains doesn’t speed up from that of November, it would take about 3 years to get back to the pre-pandemic peak. But this is too low a bar because it doesn’t factor in job growth that would have occurred had we remained on the earlier trend. Hitting that target at this rate would take 4 years (see figure below).

Source: BLS, my calculations

In other words, we’ll need much faster job growth if we are to get back to full employment in a timely manner.

Private sector jobs grew more quickly last month, up 344,000. One reason for this difference was 93,000 fewer temporary federal hires for the 2020 Census. Another is the decline in local education jobs, down 21,000 in November and 688,000 since February, a function of both Covid-induced disruptions to public schools and struggling municipal budgets.

Other concerning indicators from today’s report include:

–A sharp rise in long-term unemployment (jobless for at least 27 months), accompanied by a continuing shift from those unemployed due to temporary layoffs and those facing more lasting job searches. Since August, the number in long-term unemployment is up 2.3 million, the largest such increase on record.

–In-person service jobs, like those in the leisure and hospitality sector, are particularly at risk when the virus is spiking. After growing at a solid clip in recent months, restaurant jobs were down 17,400 in November. 

–The number of private-sector industries adding jobs in November fell sharply, from 71 to 59 percent.

This jobs report shows the clear impact of two intersecting forces: the spiking virus and the fading of earlier fiscal relief packages passed by the Congress. The former, as noted, is continuing to put firm, downward pressure on the pace of job creation. The latter means that fiscal support is fading well before the job market is up to the task of replacing lost labor incomes. 

Since the Federal Reserve is already doing what they can to keep the cost of credit very low, the missing piece is added fiscal support. As President-elect Biden said today, “If Congress and President Trump fail to act, by the end of December 12 million Americans will lose the unemployment benefits they rely on to keep food on the table and pay their bills.”

The good news is that Congress is considering a new, bipartisan, $900 billion relief plan that would help avoid some of the suffering due to the ongoing health and economic crises. Today’s jobs report provides a clear, unequivocal signal that this package, which is but a partial first step towards a robust, resilient recovery, needs to get quickly into the economy and into the lives of vulnerable families.

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