.November Jobs Report Sends Mixed Signals About U.S. Economy

By Nelson D. Schwartz and Talmon Joseph Smith, The New York Times

American employers reported weaker-than-expected hiring last month. But a survey of American workers showed a surge in the number taking jobs.

Those conflicting pictures emerged from a single government report Friday, further clouding the economic outlook as a new phase of the coronavirus pandemic unfolds.

The ambiguous Labor Department data muddles the calculations of Federal Reserve policymakers weighing whether to shift their focus from creating jobs to reining in prices. It is a complication for a White House trying to show the success of its economic course. And it offers little guidance to businesses about what to expect in the months ahead.

To be sure, recent economic readings were already a muddle. Consumer confidence readings have been at a low ebb, even as Americans continue on a spending spree. Inflation has hit levels unseen in decades, but investors seem unperturbed.

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Part of the puzzle Friday arose because the Labor Department report is based on two surveys: one polling households and the other recording hiring among employers.

The survey of employers showed the addition of just 210,000 jobs in November on a seasonally adjusted basis, the year’s weakest showing. Economists had forecast a second straight gain of more than 500,000.

But good news abounded in the household survey, which showed that the total number employed, seasonally adjusted, jumped by more than 1.1 million. The unemployment rate fell to 4.2% from 4.6%.

“I don’t know that I’ve ever seen such an extraordinary gap between the two surveys,” said Diane Swonk, chief economist for the accounting firm of Grant Thornton in Chicago.

The overall participation rate, which measures the proportion of Americans who either have jobs or are looking for one, rose by 0.2 percentage point to 61.8%, its healthiest level since the pandemic hit. The rate for prime-age workers, 25 to 54 years old, also edged up.

There was a big increase in participation last month among Hispanic men and women, who were among the hardest hit by the pandemic.

Still, the lackluster hiring number was a reminder of the on-again, off-again pattern in the labor market since the pandemic began nearly two years ago. This month, job gains in businesses where face-to-face contact is required — like stores, restaurants, bars and hotels — were especially soft.

Retail employment dropped by 20,000 last month on a seasonally adjusted basis, while hiring in leisure and hospitality industries rose by 23,000, compared to a gain of 170,000 in October. The white-collar sector, which has largely shrugged off the worst effects of the pandemic, remained a source of strength, with a 90,000 jump in employment in professional and business services.

Hiring at factories jumped by 31,000, while transportation and warehousing gained nearly 50,000 workers, an indication of how online commerce is picking up speed before the holidays.

Despite a fairly tight labor market, the economy is still roughly 4 million jobs short of pre-pandemic levels. About one-third of those positions are in the leisure and hospitality sector, which is vulnerable if the omicron variant of the coronavirus — which came to public attention after the November job surveys were conducted — turns out to be as much of a threat as the delta strain.

“That’s the risk, but it probably won’t show up before Christmas,” said Scott Anderson, chief economist at Bank of the West in San Francisco. “It could be an issue in the new year. We’re still dealing with the COVID pandemic, and the risks are there for the economy and hiring.”

Many labor market analysts argue that there is much room from employment growth because so many people have yet to return to the labor force and because businesses overall are in a sturdy financial position with the capacity to expand both supply and their payrolls.

“To me, the most important question in the economy going forward is: Will companies improve jobs enough to entice people back into employment and to face those higher risks?” said Aaron Sojourner, a professor at the University of Minnesota and a former economist at the Council of Economic Advisers for the previous two administrations. “The big wild card is the virus and our public health efforts, and second is the Fed and how they adjust.”

Throughout the fall, the economy’s path has been characterized by clashing signals.

The “quits rate” — a measurement of workers leaving jobs as a share of overall employment — has been at or near record highs, which suggests that workers are confident they can navigate the labor market to find something better. But the University of Michigan’s survey of consumer sentiment dropped to levels not seen since the sluggish recovery from the recession of 2007-09.

The report noted “the growing belief among consumers that no effective policies have yet been developed to reduce the damage from surging inflation.” Shoppers are facing the steepest inflation in 31 years. In October, prices increased 6.2% from a year earlier.

Nonetheless, markets remain relatively calm. The major stock indexes are up by impressive levels this year. And bond yields, which tend to move higher in inflationary environments, remain near record lows, indicating that investors do not see inflation as a longer-term threat to the economy or financial stability.

In recent days, Federal Reserve Chair Jerome Powell has faced pressure from different political camps to focus more tightly on price increases.

Critics of the Fed say the central bank’s “accommodative” bond-buying policies — which have kept borrowing costs low and led to a large and continued increase in the money supply — went on too long and were irresponsible in light of an already aggressive emergency response from Congress.

Fed officials, including Powell, still maintain that the price increases mainly reflect pandemic aberrations that will dissipate. But in congressional testimony Tuesday, Powell signaled a pivot from revitalizing the economy to keeping a lid on prices.

“The economy is very strong, and inflationary pressures are high,” he said. “It is therefore appropriate in my view to consider wrapping up the taper of our asset purchases.”

Economists are divided over the potential effect of a winter coronavirus surge. Some say it could cool off the economy, easing inflation because it could inhibit in-person activities. Others say a new wave could raise prices further by complicating the logistics of supply chains.

John Williams, president of the Federal Reserve Bank of New York, told The New York Times on Wednesday that the new variant could “mean a somewhat slower rebound overall” yet “increase those inflationary pressures, in those areas that are in high demand.”

For consumers, one potentially positive effect of renewed virus fears is the recent pullback in energy prices, which have risen substantially this year. The spikes have been particularly intense for fuel oil — which is used for industrial and domestic heating — and for crude oil, which directly translates to gasoline prices at the pump.

One cure for increasing prices is for consumers’ take-home pay to keep up with them. And with many businesses eager to attract workers, wages for nonsupervisory workers continued their upward climb. Average hourly earnings were up 8 cents in November, to $31.03, and are 4.8% higher than a year ago — though that rate is exceeded by the most recent inflation readings.

This article originally appeared in The New York Times.


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