The recall of workers and job creation continued to slow in November to 245,000, while the unemployment rate declined to 6.7%, just ahead of what is likely to be a pandemic-induced drag on domestic labor market conditions over the next few months.
Current lockdown measures will almost certainly extract a price in terms of employment and job creation.
Current lockdown measures, reflected by the churn in unemployment and claims for pandemic unemployment assistance, will almost certainly extract a price in terms of employment and job creation.
From here, employment gains will become far more difficult to achieve and the unemployment rate will likely stall until firms and individuals are certain they will have access to a safe and effective vaccine that permits the resumption of normal social and economic activity.
The major policy implication from the November report, released by the Bureau of Labor Statistics on Friday, is that the improvement in the top line will create a sense of complacency among policymakers on the need for another robust round of fiscal aid. This is a potential policy error that could result in greater long-term economic scarring given the risks around the pandemic.
Should Congress and the administration balk at another round of fiscal aid this year, the resulting near-term policy mix will likely tilt toward an increase in the pace and intensity of asset purchases by the Federal Reserve when it meets on Dec. 16.
While we are outright bullish on growth and employment conditions in the second half of 2021, what is going to unfold over the next few months requires a host of measures to address the threats to the economy. These measures include the targeting of fiscal aid at small service sector firms, replenishing unemployment insurance, strengthening eviction protections and forbearance measures, as well as providing direct aid to state and local governments to prevent an increase in public sector unemployment.
Most important, while the first derivative number in Friday’s report is undeniably positive, the second derivative, or the rate of change of the rate of change, is negative and implies risk of a much slower or outright negative number in the December report.
Beneath Friday’s headline number, the labor force declined by 400,000 in November, which is likely a reflection of the damage caused by the second wave of the pandemic as the labor force participation rate declined to 61.5%.
Total private employment improved by 344,000. Manufacturing and construction rose by 27,000, while goods production advanced by 55,000. The private service-providing area of the economy saw an increase of 289,000 jobs, with trade and transport adding 121,000, business services 60,000, education and health 54,000, and leisure and hospitality 31,000. Government hiring declined by 99,000, with the federal government shedding 86,000 jobs on the month.
For more information on how the coronavirus is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.
