Friday, December 3, 2021
The domestic economy added just 210,000 jobs during November, well below Bloomberg-surveyed economists’ consensus forecast for a gain of 550,000 and below October’s revised tally of 546,000. The net revision to prior months was positive but only by 82,000.
The modest 23,000 gain in leisure and hospitality jobs, which were up 170,000 in October, and a 20,000 drop in retail jobs don’t make much sense given solid retail sales data of late. That could set up a positive reversal from revisions next month, though that potential bump will play some tug-of-war with the emergence of the Omicron COVID-19 variant, which came after the November survey period ended.
As shown in the LPL Chart of the Day, for the past four months the pace of job gains has been well below the pre-Delta variant levels of near 1 million back in June and July. However, there are a number of reasons to be optimistic that job growth picks up in early 2022, assuming the Omicron variant doesn’t get in the way.
“The job growth number is disappointing, no doubt, especially considering the survey period fell before we even know the name of the newest Covid-19 variant,” noted LPL Financial Equity Strategist Jeffrey Buchbinder. “While Omicron may curb hiring a bit over the next month or two, we remain confident in our expectation for strong job gains and above-average growth in the U.S. economy in 2022.”
The story was clearly better when looking at the unemployment rate, derived from the household survey rather than from employers. The unemployment rate unexpectedly fell from 4.6% to 4.2% in November as workers—in an encouraging sign—came off the sidelines (1.14 million of them), lifting the participation rate by 0.2% to 61.8%, a post-recession high but still well off pre-pandemic levels.
Inflation data also painted a somewhat reassuring picture. The year-over-year increase in average hourly earnings rose less than expected at 4.8% (+0.3% month over month), below consensus expectations of 5.0% and 0.4%, and not enough to keep up with the Consumer Price Index (CPI) over the same period. It’s reasonable to conclude that the increase in labor participation helped limit wage increases, but we have a long way to go there still. The labor market is still 3.9 million jobs below pre-pandemic levels and the labor market remains under-supplied, as noted above. In other words, further improvement in participation will still be needed to help contain inflation pressure.
Some will argue that this report will make the Federal Reserve (Fed) think twice before accelerating tapering of its bond purchases, but we’re not so sure.
“There were a number of positives with this jobs report,” explained LPL Financial Fixed Income Strategist Lawrence Gillum. “Labor force participation increased and the unemployment rate fell—both of which point to a continued strong jobs market. That may give the Fed reasons to speed up its tapering plans.”
Overall, this report is a disappointing reminder that we’re going to have to wait longer for the booming jobs numbers that we still expect to see. We continue to expect more people to get back to work in the months ahead, in an environment of strong labor demand, which can help alleviate wage pressure and firm up the economic growth outlook. Omicron is a risk but based on the information we have today, we do not expect that variant, or any others, to meaningfully slow the job market recovery in 2022.
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