Insights and Perspective

 

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November 2021 Labor Market Report Shows Divergence in Business and Household Surveys

The Bureau of Labor Statistics (BLS) released its monthly Current Employment Statistics (CES) report and Current Population Survey (CPS) for November 2021 on Friday, December 3rd. 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 results mark 21 months since the Covid-19 economic lockdown. 

Employment in the U.S. rose by 210,000 jobs. This marks a slowdown from the 546,000 jobs created in October. The pace was somewhat slower than most expectations with the Geographic Solutions, Inc. forecast at 613,000 and the WSJ Economist Survey projection at 573,000 jobs. The Geographic Solutions forecast was derived from internal data on the number of job searchers, job severances, and applications for unemployment benefits filed on Geographic Solutions state client sites. The forecast uses unemployment claims data from the U.S. Department of Labor (USDOL).

The unemployment rate dropped to 4.2%, below the Geographic Solutions forecast of 4.4%. The WSJ forecast of 4.5% was slightly higher. The unemployment rate forecast used internal data on the number of job openings, job severances, job applications, job searchers, and the number of applications for unemployment benefits filed on Geographic Solutions state client sites. The forecast uses unemployment claims data from the USDOL.

Job creation was strongest in Professional & Business Services (90,000). Construction, Manufacturing, and Trade, Transportation, & Utilities each grew by more than 30,000 jobs for the month. Despite the growth in Trade, its retail subsector shed 20,000 jobs, indicating muted seasonal shopping for the month. Government employment fell for the fourth consecutive month. 

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 U-3 unemployment rate declined to 4.2% from the previous month. 

The labor force participation rate increased to 61.8% from the previous month. 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 fell 0.5% to 7.8%. Declines in the unemployment rates with a growing labor force participation rate indicate that the labor market is shaking off some of the slack experienced in the early fall.

November presented a dichotomy between the Business Establishment Survey (CES) and Household Survey CPS). It is not unusual to see light job growth with a declining unemployment rate. However, that is usually a result of discouraged workers dropping out of the labor force. That was not the case as the labor force participation rate ticked up last month. This may be a sign that many people are taking jobs as self-employed, contract, or “gig-economy” workers which do not get counted in the CES. There has been some reporting to back this up. If this trend continues then judging the state of the recovery should rely more on the unemployment rate and the labor force than the number of recorded new payroll jobs each month.



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