Once again with a monthly report on the US labour market, the real story is to be found in the detail not the headline new jobs figure.
Several months ago a weak report for September was due to seasonal factors not catching up with changes in the education sector of the US labour market thanks to Covid.
November’s report was (like September’s) surprisingly weak with only 210,000 new jobs created against forecasts of between 500,000 and 500,000.
The unemployment rate though fell to a 21-month low of 4.2% (the lowest since March 2020 when the first wave of Covid was smashing through the US and global economies.
Now the November shortfall has analysts raising questions about whether the US Federal Reserve will increase the pace of cutting its bond buying campaign as it pivots towards controlling inflation in a more aggressive manner.
The November consumer inflation data is out this Friday and we will see five days of fruitless speculation about that, the impact of the slump in oil and petrol prices from the final week of last month, the two-day meeting of the Fed next week and the growing impact of the Covid Omicron variant which continues to grow in the US, Australia and Europe.
But for once the sharp fall in the jobless rate looks to have been right in suggesting the labour market is much stronger than the headlines purport.
The four-tenths-of-a-percentage-point drop in the jobless rate from October to November occurred even as 594,000 people entered the labour force, the most in 13 months – a bullish points
Hours worked rose, boosting aggregate wages, which in turn will help to support consumer spending heading into Christmas – more bullish points.
As was the labour force participation rate, or the proportion of working-age people who have a job or are looking for one. It hit 61.8% in November, the highest level since March 2020 and up from 61.6% in October.
The employment-to-population ratio, viewed as a measure of an economy’s ability to create jobs, jumped to 59.2%, also the highest since March 2020, from 58.8% in October, another bullish point.
Reuters quoted one economist as saying “Don’t be fooled by the measly payroll jobs gain this month because the economy’s engines are actually in overdrive as shown by the plunge in joblessness.”
While just 210,000 jobs were created last month (the lowest amount since last December), an extra 82,000 jobs were created in September and October, (that’s been a factor all year as extra jobs were found by and reported by the Bureau of Labor Statistics).
Still 6.1 million tonnes have been created in the US in the 11 months to November, but that left US employment 3.9 million below the peak in February 2020. And there were still 10.4 million job vacancies unfilled at the end of September, the most recent data.
Oddly though, given the start of the post-Thanksgiving retail selling season, 20,400 few jobs were reported from retailing, along with a drop of 12.600 in the education,
That led to a drop of 25,000 in overall government jobs, the fourth straight monthly decrease. But that wasn’t accurate because of the continuing impact of Covid driven staffing fluctuations have altered normal seasonal patterns in state and local government education.
There have also been numerous reports of shortages of bus drivers and other education support staff. These problems are beyond the reach of the seasonal adjustment factors used to work out the employment figures at the moment.
Leisure and hospitality sector added 23,000 jobs, down from 170,000 in the previous month when re-openings were more prevalent. Professional and business services saw 90,000 extra jobs, manufacturing, 31,000 and thousands more in transportation and warehousing.
Average hourly earnings rose 0.3%, keeping the annual increase in wages at 4.8%. The average workweek climbed to 34.8 hours from 34.7. As a result of the longer workweek, aggregate wages rose 0.7%.
Fed Chair Jay Powell told the US Senate last week that the central bank should consider speeding up the winding down of its massive bond purchases at its December 14-15 policy meeting and made it clear he no longer saw the current inflationary burst as ‘transitory’.
Andrew Hollenhorst, chief US economist at Citigroup wrote in a commentary on Friday. “an unemployment rate that is poised to fall below 4.0% perhaps in the coming months keeps a first Fed rate hike in June or even earlier firmly on the table.”
