The U.S. economy added 245,000 jobs in November. The report was the first clear indication that the recovery is slowing as economists were expecting nearly 460,000 jobs. It's also likely that the numbers were impacted by slowing economic activity and shutdowns in many areas due to spiking coronavirus case counts.
If November's pace of job creation became the norm, then it would take 40 months for the labor market to recover from all the job losses due to the coronavirus. However, this is a theoretical possibility, as it's likely once the vaccine's distribution begins then it's likely that we will see rapid job growth in many sectors. Additionally, the weak jobs report also marginally increases the chances of Congress passing another stimulus package, as it becomes clear that the economy continues to require support.
Inside the Numbers
The Bureau of Labor Statistics (BLS) report was disappointing in many respects, especially since the economy added more than 600,000 jobs in October. It also marked the first month that the report came in below expectations. However, it's also hard to draw any sort of meaningful conclusion from the report given the unusual circumstances.
The unemployment rate did fall to 6.7% from 6.9% in October. However, the main reason for the drop was more workers leaving the labor force. Additionally, the BLS reported that 3.9 million people were unemployed but unable to find work due to the pandemic.
The disappointing jobs report is in-line with other high-frequency economic indicators like credit-card spending which also showed signs of decline. Most analysts attribute this to the rising case counts and restrictions on activities in certain areas.
In total, the economy lost 9.8 million jobs during the crisis with most job losses in hospitality, restaurants, and other types of services. There are fears that we could see mounting job losses from state and local governments in the coming months especially if Congress doesn't deliver relief.
In terms of different parts of the economy, the retail sector saw less hiring of seasonal workers due to the coronavirus depressing foot traffic to retail stores. In turn, hiring in warehouses and transportation exploded higher which reflects increased eCommerce.
Stock Market Impact
The stock market shrugged off the poor report. It opened slightly lower, but the S&P 500
Stocks were higher because the poor report slightly increases the odds of a second, stimulus package being approved. There were some murmurs among Republicans in Congress that the strong economic data and recovery in stock prices signaled that another stimulus may not be necessary. This report dispels those notions, and it also signals that December is likely to be worse, especially as retail foot traffic continues to be weak amid spiking case counts.
