He (the President) Makes It Look So Hard
Circumstances are better than they appear
Some people make their jobs look so easy. For years, Michael Jordan glided across the floor, occasionally taking off into low-Earth orbit on his way to six NBA championships. Roger Federer similarly glides around the tennis court, his strokes as elegant as a Van Gogh masterpiece.
Then there’s our President, Joe Biden. Every day appears to be a struggle. His effort is high, his approval ratings low. Every cough, every slip, every retreat from Afghanistan brings with it millions of unfriendly social media posts. He can’t even get a break with data released by his own government. Woe is Joe.
Today’s employment report highlights just how bad one’s luck can be. Here’s the headline number to which everyone will pay attention: U.S. payroll employment increased by just 210,000 in November, about 360,000 short of consensus expectations (say it ain’t so, Joe!). But if one peeks behind the headline number, there is much good news in today’s data release – news that assuredly will spawn dozens of positive social media messages.
Hope can be destructive. A slew of recent data indicated that today’s jobs number would be a Biden blockbuster. ADP’s Employment Report had national private payrolls up 534,000 in November. LinkedIn observed hiring at “the highest rate we’ve seen not only since the pandemic started, but since LinkedIn began tracking hiring rates in early 2015.” Indeed, job growth was massive, but only in the Current Population Survey (household data), to which people pay far less attention. That report indicates that America added 1.1 million jobs in November (say so, Joe!).
So why did the establishment survey of businesses and household data vary so much (by nearly a million jobs in one month)? The first likely explanation is seasonal adjustments, which have been wacky during the pandemic. The public health crisis and attendant behavioral shifts have altered seasonal hiring patterns. Today’s monthly seasonal adjustments, which are based on historic patterns, may no longer make much sense. If one looks at the non-seasonally adjusted data, payrolls actually increased by 778,000 in November according to the establishment survey. That’s the most jobs added in a November since the BLS started tracking payroll employment in 1939.
Another potential explanation is that the pandemic has made it more difficult for BLS to conduct its survey in the first place. Not only do they have to establish a representative sample of businesses to complete the survey, they have to consider the fact that many of the businesses in their sample no longer exist. Are people failing to answer BLS’ queries because they are just too busy, or is it because so many businesses have faltered altogether?
There is some more obvious good news in November’s employment report. The unemployment rate fell to 4.2%, and it fell for the right reasons. America’s labor force expanded by nearly 600,000, the largest monthly increase in more than a year. It is still smaller, however, than it was when the pandemic began to undo the economy in February 2020. The labor force participation rate increased to 61.8%, ending a six-month period during which it seesawed between 61.6% and 61.7%. Given the severity of labor shortages, labor force growth is arguably more important at this stage of the recovery than any other factor. Come back to work, people.
And as if Joe didn’t have enough on his plate, here comes omicron. Economists have precious little insight regarding what impacts this latest variant will have, with scenarios ranging from “another recession” to “no discernible impact.”
As always, you can read my in-depth thoughts regarding the construction industry’s labor market at Associated Builders and Contractors.
Three (Somewhat) Key Takeaways
The employment-population ratio increased to 59.2 in November, its highest level since the pandemic began, but still significantly lower than the 61.1 ratio that prevailed as of February 2020.
The Black/African American unemployment rate plummeted from 7.9% to 6.7%, but it mostly plummeted for the wrong reasons since the Black/African American labor force participation rate fell from 61.1% to 60.8%. This appears closely related to educational attainment levels. After adjusting for educational attainment, the Black employment-population ratio is actually higher than for other races (an interesting example of Simpson’s Paradox).
The share of workers who teleworked in November fell to 11.3%, likely because non-teleworking jobs were added rather than teleworking employees being called back into the office in large numbers.
What to Watch
The Greek alphabet, with omicron hanging over the economy like the Sword of Damocles.