Labor market conditions deteriorated in November as the economy slowed and the country felt the weight of the resurgent COVID-19 health crisis and a return to temporary closures and restrictions intended to reduce the risk of spread.
Employers added 245,000 jobs in November, well below expectations for around 500,000, which would still have represented a notable slowdown in the pace of job creation. Revisions to the preceding two months were mixed but nudged prior job creation up by 11,000.
While disappointing, the gain was dampened by the elimination of 93,000 temporary census workers that were terminated by the federal government. The loss of those jobs aren’t reflective of economic conditions, but the winding down of their responsibilities. Even adjusting for that skew, the net increase in payrolls was softer than anticipated.
Payrolls have now increased for seven consecutive months after experiencing a sharp decline in the spring following the outbreak of COVID-19. Through November, the labor market had recovered over 12 million of the 22 million jobs lost in March and April.
Despite that significant recovery, the nation’s jobless rate remains elevated at 6.7%. There is still a long way to go to return a massive number of sidelined workers to the employment rolls; the notable slowdown in the pace of growth and the growing risk created by the sharp uptick in COVID-19 cases across the country represent significant headwinds to progress on the jobs front.
Most economic data has pointed clearly to an economy that’s still growing but has sharply decelerated since its record-setting third-quarter expansion. That was to be expected as a normal cyclical development following the initial surge off the bottom in the immediate aftermath of recession.
The exacerbating factor in the current environment is the significant risk to the economy presented by the ongoing COVID-19 pandemic and the potential for some dark months ahead on the health front. As seen last year, the potential for additional lockdowns could have meaningful ramifications for the economy, as would changing consumer behaviors.
The weakening in labor market conditions at a time that unemployment remains high speaks clearly to the need for additional fiscal intervention on the part of the federal government. For households, businesses, healthcare providers, and state and local governments negatively impacted by the pandemic, another fiscal bridge will be critical.
Hopeful news on the availability of a vaccine suggests that there should be a very bright light at the end of an unusually dark tunnel, but we still have to go through the tunnel. An additional fiscal package wouldn’t be a silver bullet, but it would go a long way toward alleviating a more severe dip in activity in the coming months.
The bottom line is that the deterioration of job market conditions reflects the marked slowdown clearly underway in the economy. Will that slowdown ultimately tip into contraction? That remains to be seen, but the growing need for a fiscal response will pressure policymakers to act sooner rather than later. Recent developments suggest that serious progress is being made. Will it be enough and will it be delivered in time to prevent further damage? That's the question.
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