WASHINGTON – America’s unemployment rate tumbled last month to its lowest point since the pandemic struck, even as employers appeared to slow their hiring – a mixed picture that pointed to a resilient economy that’s putting more people to work.
The government reported Friday that businesses and other employers added just 210,000 jobs in November, the weakest monthly gain in nearly a year and less than half of October’s increase of 546,000.
But other data from the Labor Department’s report painted a brighter picture. The unemployment rate plummeted from 4.6% to 4.2% as a substantial 1.1 million Americans said they found jobs last month.
The U.S. economy still remains under threat from a spike in inflation, shortages of labor and supplies and the potential impact of the omicron variant of the coronavirus. But for now, Americans are spending freely, and the economy is forecast to expand at a 7% annual rate in the final three months of the year, a sharp rebound from the 2.1% pace in the previous quarter, when the delta variant hobbled growth.
Employers in some industries, such as restaurants, bars and hotels, pulled back on hiring in November. By contrast, job growth remained solid in areas like transportation and warehousing, which are benefiting from the growth of online commerce.
The fall in the unemployment rate was particularly encouraging because it coincided with an influx of a half-million job-seekers into the labor force, most of whom quickly found work. Normally, many such people would take time to find jobs and would be counted as unemployed until they did. The influx of new job-seekers, if it continues, would help reduce the labor shortages that have bedeviled many employers since the economy began to recover from the pandemic.
“That’s good news for job seekers and workers, and for businesses too,” said Julia Pollak, chief economist at online jobs site ZipRecruiter. “It looks like the supply constraints are easing a bit with the unemployment rate low and wage growth high” – two factors that often encourage people to search for work.November’s report reflects a divergence in two surveys that the government conducts each month. The unemployment rate is calculated from a survey of households. For last month, this survey found that 1.1 million more people reported that they were employed. A separate survey of employers, called the payroll survey, reported just 210,000 added jobs.
Though the results of the two surveys typically match up over the long run, they can differ sharply in any one month. For November, economists noted that the big employment gain in the household survey brought that figure in line with the larger increases in the payroll survey during previous months.
The hiring gains in the payroll survey have also been revised up substantially in recent months, and some economists suggested that this will likely happen again in coming months.
“My sense is the household estimate is closer to the truth around what is happening in the jobs market and … should anticipate a significant upward revision to the November data next month,” said Joseph Brusuelas, an economist at RSM, a tax and advisory firm.
The household survey also captures self-employed and gig workers, whose ranks have grown steadily since the pandemic struck, unlike the payroll survey. Some economists attribute part of the nation’s labor shortage to an increase in people who have recently gone to work for themselves.
Among them is Daniel Nolan of Raleigh, North Carolina. Like millions of other Americans, Nolan, 36, had his life and work upended by COVID-19. His 9-year old son was in virtual school at the outset of the pandemic. And his father-in-law, ill with cancer, moved in with his family, prompting Nolan to leave his job as a software engineer at a private equity firm.
Nolan expected this period to last only a few months. But when he began looking for work again, the job offers he got weren’t what he was looking for. So in August, he decided to strike out on his own.
So far, Nolan said, he’s earning roughly the same income that he did before. He plans to keep consulting for at least two more years – and may never return to a corporate job.
“I’m able to make at least as much as I was making at my previous job and still have the flexibility of being a consultant,” he said.
Friday’s report showed that the number of unemployed Americans sank in November to 6.9 million, compared with the pre-pandemic number of 5.7 million. And average wages, which have been rising as employers try to attract or keep workers, increased a strong 4.8% from a year ago.
For months, employers have been struggling with worker shortages because many people who lost jobs in the pandemic have not, for various reasons, returned to the workforce. But last month, nearly 600,000 people came off the sidelines to look for jobs and were generally hired quickly. The government classifies people as unemployed only if they’re actively seeking work.
As a result, the proportion of Americans who are in the workforce rose from 61.6% to 61.8%, the first significant increase since April. If that much-anticipated development continues, it could point to stronger job growth ahead.
Even as the jobless rate has steadily declined this year, the proportion of Americans who are working or searching for jobs has barely budged, at least until this month. A shortage of job-seekers tends to limit hiring and force companies to pay more to attract and keep employees. Higher pay can help sustain spending and growth. But it can also feed inflation if businesses raise prices to offset their higher labor costs, which they often do.
Whether or not the increase in job-seekers continues is a critical question for the Federal Reserve. If the proportion of people in the workforce doesn’t rise much, it would suggest that the Fed is nearing its goal of maximum employment.
With inflation at a three-decade high and far above the Fed’s 2% annual target, reaching its employment mandate would heighten pressure on Chair Jerome Powell to raise interest rates sooner rather than later. Doing so would make loans more expensive for many individuals and businesses.
President Joe Biden on Friday highlighted the drop in the unemployment rate, which he called “an extraordinary bit of progress.” Still, the slowdown in job growth, if it persists, will pose a challenge for Biden, who has received poor marks in a handful of public opinion polls for how he has handled the economy.
Though most indicators show the economy remains on the rebound, White House aides have privately expressed frustration that the president hasn’t earned credit for the improvement and instead is facing criticism over the spike in inflation and gas prices that have burdened Americans in recent months.
The government’s survey of businesses suggested that some employers were more cautious about hiring last month. Restaurants, bars and hotels added just 23,000 jobs, down from 170,000 in October. That could reflect the effects of an uptick in COVID-19 cases last month and a reduction in outdoor dining.
Retailers cut 20,000 jobs, a sign that holiday hiring hasn’t been as strong as in previous years. But transportation and warehousing firms added 50,000 positions, which indicates that online retailers and shippers anticipate healthy online shopping.
Jeff Crivello, CEO of BBQ Holdings, which owns about 300 restaurants, said that for him, hiring has become a little easier in recent months. None of his restaurants are now closing early because of staff shortages. But it’s still a struggle. The company hired more than 300 people in November yet still has about 500 open jobs.
“The pandemic,” Crivello said, “ushered in a seismic shift in consumer behavior and demand and the desires of the workforce.”
His company has raised average hourly pay 15% since the pandemic struck but is competing with the new opportunities that many restaurant workers have, including higher-paying jobs at warehouses or in trucking. Many younger workers, Crivello said, are finding jobs in the cannabis industry or in gaming or even making money building followings on social media.
The jobs outlook for the coming months has become hazier with the emergence of the omicron variant. Little is definitively known about omicron, and widespread business shutdowns are considered unlikely. Still, omicron could discourage some Americans from traveling, shopping and eating out in the coming months and potentially slow the economy.
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