Insights and Perspectives

The Bureau of Labor Statistics (BLS) released its monthly Current Employment Statistics (CES) report and Current Population Survey (CPS) for November 2020 on Friday, December 4^th.  The results mark nine months since the Covid-19 economic lockdown and seven months since the labor market recovery began.  The monthly change in employment given by the CES and the unemployment rate from the CPS are seen as the standard gauges for assessing the health of the U.S. labor market.  The CES reports that employment in November 2020 increased by 245,000.  The unemployment rate fell to 6.7%.  Job creation as of November 12^th (the date of the survey) has fallen to a point that is in line with pre-pandemic job numbers (February 2020 had 251 thousand).  Now near the December 12^th survey date, the weekly initial unemployment benefits averaged for December increased by 20,000.  These developments together are fairly discouraging considering that the job market still has 9.8 million jobs left to go to reach its pre-pandemic level in February. 

• If this pace of job growth continues, it will take over three years for employment to return to its February number.  In the previous month, we noticed the different patterns between goods-producing and service-providing industries with goods-producing industries posting accelerated growth for two straight months.  However, November jobs in goods-producing industries saw an increase of 55 thousand, down from the 107 thousand the month before.

• The job market gains were hampered by a contraction in the number of public employees in November.   The government sector was the only industry to decline significantly during the month as seen in the chart below.  The public sector job loss was mainly due to the lingering expirations of temporary federal Census jobs.  The Retail Trade sub-component of Trade, Transportation, & Utilities also saw a sizeable decline but that was more than offset by the strong performance of its Transportation & Warehousing sub-component.  This appears to reflect that the long-term shift to online retail instead of brick-and-mortar retail during the holiday season has been put on steroids by Covid-19.

• Leisure & Hospitality continues to struggle after it collapsed in March and April.  The bottom line in the graph below illustrates the severity of the pandemic effects on Leisure & Hospitality compared to other industries.  Its employment remains 20.4% below February, more than twice the remaining percentage of any other major sector.

• On the surface it looks like the fall in unemployment is good news.  The U-3 unemployment rate fell last month from 6.9% to 6.7%.  However, the labor force participation fell.  The U-3 unemployment rate is the standard form of measuring unemployment in the U.S. labor market and includes those that are actively seeking a job but unable to find one.  The more expansive U-6 unemployment rate counts discouraged workers who are no longer actively seeking work (and therefore no longer in the labor force) and those that have settled for part-time employment but desire a full-time job.  This measure of unemployment ticked down last month by 0.1% to 12.0%.  The smaller decline in the U-6 unemployment rate shows that a higher share of the unemployed have become discouraged and are not actively seeking work.  

• The future for the U.S. job market is a little murkier now.  We have to hope that November was a statistical blip and the labor market will return to an aggressive recovery going forward.  However, the subsequent initial unemployment claims data does not look promising.  The December average of these claims saw an above-zero change for the first month since the recovery began as shown in the chart below.  The lower-than-expected jobs outcome may prod some in congress to pass an additional stimulus, but even if that were to happen the economic consequences probably would not be felt until next year.