Pace of Job Growth Slows: “V” Set to Become a “W”
Ah, that Pesky Second Derivative
U.S. payroll employment rose by 245,000 in November 2020, a figure that would be delightful under normal circumstances but was disappointing under current ones. Today’s job growth numbers were the weakest since the economy began its healing process in May and well below the consensus that America would add closer to half a million jobs in November.
U.S. payroll employment is 9.8 million below February’s level, when the pandemic brought the lengthiest economic expansion in American history to a premature ending. At November’s pace of job creation, it would take until March 2024 to achieve full recovery. Here’s the problem. The next few months are set to be even slower in terms of job growth as economic lockdowns resume and the economy is hit with another supply shock.
Some will raise their hands and point out that the unemployment rate declined to 6.7% in November, a multi-month low. True, but even that bright spot is blighted by the fact that the decline was largely attributable to a 400,000 person decline in the labor force. The labor force participation rate fell to 61.5% in November, remaining at levels not observed since Gerald Ford was in office.
If it wasn’t clear already, we’re plummeting toward a second recession.
Three Key Takeaways
Local government educational employment (public schools) has decreased by 111,500 since September, and state government educational employment (colleges/universities) has fallen by 59,300 jobs over the same period. Many of these jobs will (presumably) snap back once a vaccine is distributed and in-person teaching resumes, but cutbacks will get worse before they get better as states and localities struggle to balance budgets.
The food services and drinking places sector lost another 17,400 jobs on net in November. At this point, there’s not much left to say about the devastation to the restaurant industry, which will get worse as temperatures continue to dive and outdoor dining becomes impractical in much of the nation.
Retail trade lost 34,700 jobs in November. The transportation and warehousing segment added 145,000 jobs in November. Amazon is winning and will keep winning. They are really good at what they do.
What to Watch
Stimulus. We need stimulus. Stimulus, stimulus, stimulus. But even that may not prevent a second recession. Stimulus supports the demand side of the economy. We are facing a supply shock. If we shut it down, the economy recedes even if people have money to spend.
Our 2021 Webinars and Presentations
We’re thrilled to announce our 2021 presentation, Anirban Basu and the Chamber of Data. If you’re interested in having me give this wizardly economic forecast to your stakeholders, contact us at webinars@sagepolicy.com.