November jobs report: decidedly mixed signals

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November jobs report: decidedly mixed signals, most consistent with a still-growing but decidedly weakening economy

 – by New Deal democrat



Since early this year I have expected employment to follow the halt in consumption growth, decelerating over time to a stall. This has only intensified given the major decline in growth in payroll withholding tax payments, which are near recessionary. 

This expectation was partially met today in that the three month average in employment gains since February, which had decelerated from over 500,000 to 289,000 through October, decelerated further to 272,000 through November.

Aggregate payroll growth also declined YoY from 9.1% to 8.7%, but is still probably above the inflation rate.

Here’s my in depth synopsis.

HEADLINES:

• 263,000 jobs added. Private sector jobs increased 221,000. Government jobs increased by 42,000. 
• The alternate, and more volatile measure in the household report *delined* for the second month in a row, by -133,000 jobs. In the past 8 months, according to this report, only 12,000 jobs have been added! The above household number factors into the unemployment and underemployment rates below.
• U3 unemployment rate was unchanged at 3.7%.
• U6 underemployment rate fell -0.1% to 6.7%.
• Those not in the labor force at all, but who want a job now, rose 167,000 to 5.550 million, compared with 4.996 million in February 2020.
• Those on temporary layoff declined -44,000 to 803,000.
• Permanent job losers rose 127,000 to 1,368,000.
• September was revised downward by -46,000, while October was revised upward by 23,000, for a net decrease of 23,000 jobs compared with previous reports.

Leading employment indicators of a slowdown or recession

These are leading sectors for the economy overall, and will help us gauge whether the strong rebound from the pandemic will continue.  These tilted to the negative:

• the average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, was declined -0.1 hour to 40.9, and is down -0.7 hours from its recent February peak of 41.6 hours. This is consistent with the onset of a recession.

• Manufacturing jobs increased 14,000, and are at a level higher than before the pandemic.
• Construction jobs increased 20,000, also at a level higher than before the pandemic. 
• Residential construction jobs, which are even more leading, declined by -2,600.

• Temporary jobs, which had been rising sharply, declined  by 17,200. Since the beginning of the pandemic, about 300,000 such jobs have been gained.
• the number of people unemployed for 5 weeks or less increased by 32,000 to 2,243,000, about 125,000 above its pre-pandemic level.

Wages of non-managerial workers

• Average Hourly Earnings for Production and Nonsupervisory Personnel rose $0.19 to $28.10, which is a 5.8% YoY gain, an increase of 0.3% from last month, vs. its 6.7% peak at the beginning of this year.

Aggregate hours and wages: 

• the index of aggregate hours worked for non-managerial workers declined -0.2% which is still above its level just before the pandemic.
•  the index of aggregate payrolls for non-managerial workers rose by 0.6%, and is up 8.7% YoY. This metric has been decelerating nominally almost consistently for the past 16 months.  Compared with inflation through October, it is up only 0.9% YoY (recessions typically start when it crosses zero).

Other significant data:

• Leisure and hospitality jobs, which were the most hard-hit during the pandemic, rose 88,000, but are still about -6% below their pre-pandemic peak.
• Within the leisure and hospitality sector, food and drink establishments added 62,100 jobs, but are still about -4% below their pre-pandemic peak. 
• Professional and business employment increased by only 1,000, over 1,000,000 above its pre-pandemic peak.
• Full time jobs increased 92,,000 in the household report.
• Part time jobs decreased -302,000 in the household report.
• The number of job holders who were part time for economic reasons rose 25,000 to 3,685,000.
• The Labor Force Participation Rate declined -0.1% to 62.1%, vs. 63.4% in February 2020.

SUMMARY

This report was mixed, with both strong and decidedly weak points. On the strong side, wages increased sharply, improving the YoY gains as well. The underemployment rate fell. Construction and manufacturing jobs increased. YoY aggregate payrolls decelerated further, but probably improved vs. YoY inflation. While the 3 month average gain in payrolls continued to decline, in absolute terms it remains good.

On the negative side, the manufacturing workweek has declined enough to be consistent with the onset of recession. Temporary and residential construction jobs declined. The number of short-term newly unemployed rose. All of these are leading indicators, and suggest further weakness to come. Aggregate hours worked declined, and are only up 1.3% in the past 9 months. Perhaps worse, employment as measured by the household report is only up 12,000 in total for the entire last 8 months, which is very much in line with the weak tax withholding data. In other words, I increasingly expect significant downward revisions to the recent establishment reports when they are revised next year.

This mixed report, taken all together, is most consistent with a still-growing economy, but one which is weakening, the theme for the entire last 6 months or more.

“October jobs report: late cycle deceleration and deterioration,” Angry Bear, angry bear blog