Under The Hood Of The November Jobs Report

Apparently, November’s US jobs report admitted of “too many takeaways” to quickly process.

That was one strategist’s assessment, as communicated to Bloomberg on Friday morning.

There were quite a few notables, but the overarching takeaway was clear enough: The underwhelming headline print was mitigated by an uptick in participation, a drop in the unemployment rate and, to a lesser extent, upward revisions to the previous two months. The Fed will take it. To the extent policymakers are inclined to accelerate the taper, they won’t be deterred by Friday’s report.

Read more: Jobs Report Misses Big, But Unemployment Rate Drops Sharply

With that out of the way, it’s certainly worth highlighting some nuance from the numbers.

Most obviously, leisure and hospitality gains were meager. The sector added just 23,000 jobs last month, the worst showing since January (figure on the left below).

That threatened to push the three-month average below 100,000. It also meant the sector made virtually no progress recouping pandemic losses (figure on the right above).

Drilling down a bit, food services and drinking places added just 11,000 positions, the second worst month of 2021, behind August, when the Delta wave contributed to a decline of nearly 9,000.

The figure (below) tells the story. Momentum appears to have stalled. Again.

The worry, obviously, is that Omicron curtails business, and thereby hiring, in food services this month and next.

Speaking of Omicron and a prospective winter wave, a quick look at the chart (below) suggests health care staffing is sitting near levels not seen in 15 years.

With the caveat that this is most assuredly not a series I’m familiar with, common sense dictates that you need more workers, not less, when there’s a health crisis afoot.

It wasn’t all bad news, though. Not at all. There were sizable gains for African Americans and Hispanics, for example. Or at least large drops in their respective unemployment rates.

The gap between the African American and white jobless rates posted the largest drop of the pandemic era (figure above). Do note, though, that the participation rate for African Americans fell a third month.

Any trends that suggest the labor market is moving closer to being more inclusive ostensibly argue for Fed tightening. Remember, the employment side of the mandate is now aimed at fostering broader jobs gains.

So, while welcome, signs of inclusion take the Fed further down the road to meeting its goals and thus incrementally closer to tightening policy, with the obligatory disclaimer that if you’re so inclined, you can make the jobs report “say” anything you want if you’re willing to data-mine and otherwise parse the numbers.

On the compensation front, note that wage growth for “regular” leisure and hospitality workers rose 13.4% YoY (figure below).

That’s the largest annual increase on record. MoM, wages for that cohort declined in November. It was the first monthly drop since December of last year or, more to the point, since the 2020 winter COVID wave.

Additionally, I’d note that the long-term unemployed still comprise nearly a third of the total jobless. That’s down sharply from the peak of 43.4% in March, but still unprecedented outside the pandemic and/or GFC context.

One final note: There were mixed signals from the two surveys. As Bloomberg wrote Friday, in their wrap, “we’ll have to wait and see which proves more accurate as an indicator of the underlying trend in the coming months, but at this point, the 4.2% unemployment rate in the household survey is starting to get pretty close to the pre-pandemic level of 3.5%.”