November Posts Weak Job Gains, Drop in Unemployment

Experts anticipate a significant positive adjustment in payroll gains next month

Roy Maurer By Roy Maurer December 3, 2021
concerned business owner

​U.S. employers added 210,000 new jobs in November, falling well short of expectations, according to the latest employment report from the U.S. Bureau of Labor Statistics.

Economists had forecast job growth over 500,000. The unemployment rate continues to tumble, however, falling to 4.2 percent from 4.6 percent in October.

Employment growth in November fell to its slowest rate all year, said Daniel Zhao, Glassdoor senior economist. Jobs added are down significantly from October, when 546,000 jobs were added, he said.

"Today's jobs report came in below expectations but aligns with seasonal hiring lulls," said Andrew Hunter, co-founder of London-based job search engine Adzuna. "Supply-chain issues, the big labor shortage and inflation are the main factors complicating the recovery right now. Growing concerns about the Omicron variant also bring uncertainty into the equation."

Julia Pollak, chief economist at ZipRecruiter, pointed out that the disappointing payroll gain is partly due to seasonal adjustment factors, which have been skewed by the pandemic. "The unadjusted gain was 778,000 jobs, and the household survey showed the ranks of employed workers swelling by 1.1 million," she said.

Nick Bunker, an economist at the Indeed Hiring Lab, agreed that the report is "a tale of two surveys." The household survey—which polls workers about their employment situation—shows accelerating gains, workers returning to the labor force, and low levels of involuntary part-time work, Bunker said. The establishment survey—which polls employers—showed a "significant deceleration in job growth, particularly in COVID-affected sectors."

Experts point out that survey revisions have been extraordinarily large during this pandemic and expect a significant postive adjustment in next month's report. 

Monthly job growth has averaged a solid 555,000 new jobs in 2021 but employment is still down by 3.9 million from its pre-pandemic level.

Bunker said that the underlying momentum of the labor market is still strong, but uncertainty is present. "Of course, the impact of the Omicron variant is unclear, so unfortunately we just have to wait and see."

Job Creation in Restaurants, Hotels Slows; Retail Loses

The leisure and hospitality sector, which includes bars, restaurants, and hotels, had a particularly slow month, gaining only 23,000 jobs after leading in job gains throughout the recovery. The hard-hit sector has added 2.4 million jobs so far in 2021 and regained nearly 7 million of the jobs lost in the first chaotic months of the pandemic, but remains about 1.3 million below its February 2020 level.

"The slowdown in leisure and hospitality job gains in November was a large contributor to the overall slowdown," Zhao said.

The retail sector lost 20,000 jobs, even as the holiday shopping season gears up. "Holiday hiring in retail was the weakest since 2010," Zhao said. "The shift to ecommerce may be shifting jobs from retail to transportation and warehousing."

Some of the biggest gains in November were in professional and business services (90,000 jobs), transportation and warehousing (50,000 jobs) and construction and manufacturing, (each adding 31,000 jobs).

Employment in logistics and financial services are now above their pre-pandemic levels, while health care, down 450,000 jobs since the beginning of the pandemic, added back only 2,000 jobs.

Education remains another troubled sector, Pollak said. "Employment in education services, state government education and local government education is 740,000 lower than before the pandemic," she said. "That should raise concerns about the long-term effects of the pandemic on the nation's children and youth and their human capital."

Zhao added that COVID-sensitive industries—leisure and hospitality, education and health care—account for 69 percent of the jobs shortfall relative to pre-pandemic levels.

Unemployment Falls

The unemployment rate drop came as the labor force participation rate ticked up to 61.8 percent, its highest level since March 2020.

"The labor force grew by 594,000 workers, with gains in most age groups," Pollak said. "These returning workers included 205,000 prime-age workers and 40,000 workers aged 55 or older."

She added that the gains suggest that labor force participation will gradually pick up. "There are 5.9 million people not in the labor force who say they want a job now, and these people are likely to head back as the labor market becomes sufficiently attractive."

A separate measure of unemployment that incudes discouraged workers and those holding part-time jobs for economic reasons fell to 7.8 percent from 8.3 percent. It was around 7 percent before the pandemic.

"The good news is that the unemployment rate dropped for all the right reasons," Bunker said. "The prime-age employment-to-population ratio accelerated again in November, rising by half a percentage point. If it keeps up its current pace, this metric will hit its pre-pandemic level in May of next year."

Zhao noted that the drop in unemployment was in part driven by temporary layoffs falling by over 200,000 as employers pull workers back from furlough.

"The unemployment and participation numbers are coming back to near pre-pandemic levels and yesterday's jobless claims were positive too," said Becky Frankiewicz, president of ManpowerGroup, NA. "People are coming back into the workforce and after several months of mismatch between what employers want and what workers need, we are beginning to see signs of a reconciliation. We expect to see the gap between supply and demand narrowing as employers realize they need to move closer to what people want to bring them back in—higher wages, greater flexibility and more focus on health and well-being. Now our focus should be ensuring no one is left behind in this recovery," she said.

Wage Growth

In November, average hourly earnings in the private sector increased by 8 cents to $31.03, following large increases in the prior months.

"Annual growth in hourly wages remained strong at 4.8 percent overall, and 12.3 percent in leisure and hospitality," Pollak said. "The rapid gains point to a very tight labor market in which relative scarcity and bargaining power have quickly shifted from employers to employees. Given how gradually labor force participation is increasing, wage growth is likely to remain strong in 2022."

However, she pointed out that inflation is outstripping pay gains for many workers. "Inflation in the price of gasoline, cars and housing are also adding yet more reasons why job seekers want remote opportunities, which allow them to stop commuting and to move to lower-cost housing markets," she said. 

Parting Thoughts

Experts believe that the new Omicron variant and a winter COVID-19 and flu wave may keep workers on the sidelines in the coming months.

"With workers feeling less confident about their ability to safely return to work, employers need to be more vocal on their vaccine policies and what they're doing to keep staff safe onsite," Hunter said.

He added that despite worries about a new, highly transmissible variant, he does not anticipate a lasting economic slowdown. "There's a labor shortage, employers need to hire to meet high demand, and I'm optimistic that the labor market is pushing closer to a full recovery."



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