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November US jobs report could show last breath of recovery before winter pain

The U.S. has recouped a little more than half of the 22 million jobs lost since the start of the pandemic, and November may have been the last time that any serious inroads are made into that number before a winter coronavirus surge starts taking its toll on the economic recovery.

The Econoday consensus estimate for the November non-farm payrolls report due to be released Dec. 4 is for a net addition of 500,000 jobs, down from 638,000 in October, though the range of estimates stretches from 200,000 to 610,000. The unemployment rate is seen ticking down by 0.1 percentage point to 6.8%. Even at the top of the estimate range, November's jobs tally would continue the trend of diminishing jobs gains as the economy runs out of low-hanging fruit. The U.S. gained more than 1 million jobs each month from May to August.

"The November jobs data will likely continue to ride the wave of previous months, but as restrictions ramp up and businesses close, workers will experience additional pain in the deep fall and winter months," Elizabeth Crofoot, senior economist at the Conference Board, said in an interview.

The U.S. is seeing a surge in coronavirus cases, hospitalizations and deaths just as economic aid from the CARES Act runs out, while Congress remains deadlocked on a follow-up package. The number of daily deaths from the coronavirus reached 2,760 on Dec. 2, surpassing the spring peak, while hospitalizations passed 100,000, more than double just four weeks earlier, according to data from the Covid Tracking Project.

Losing momentum

Retail, leisure and hospitality jobs will probably suffer most in November, and there will be an additional drag from the end of contracts for temporary U.S. Census Bureau workers whose hiring boosted the October jobs report, said Sarah House, senior economist and director for Wells Fargo Securities, who projects a slightly more modest 425,000 jobs added in November.

"I'm not sure we will see an outright negative number, but it is a real possibility in December, based on what we're seeing in everything from restaurant reservations to home data," House said.

The U.S. job market will not regain all of the 22.2 million jobs lost until the first quarter of 2023, according to projections from S&P Global Ratings. Real U.S. GDP will contract by 3.9% in 2020 before a 4.2% expansion in 2021 and will not return to pre-crisis levels until the third quarter of 2021, S&P Global Ratings U.S. Senior Economist Satyam Panday and U.S. Chief Economist Beth Ann Bovino wrote in a Dec. 2 report.

"The U.S. economy is showing signs of weakness this holiday season amid climbing COVID-19 infection rates and increasing circuit-breaker restrictions on touch-sensitive sectors," Panday said in an interview. "We expect the economy to stall in the fourth quarter and the first."

How bad the next few months are hinges to a large degree on whether Congress can agree on a stimulus bill. There have been a number of false dawns in negotiations in recent months, but top Democrats in the House and Senate said Dec. 2 that a $908 billion stimulus proposal serves as a basis for negotiations with Republicans. The bill as proposed would provide $288 billion in small business aid; $160 billion to state and local governments; and $45 billion for the transportation sector, including airlines.

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Signs of slowing progress in the labor market can be seen already in weekly unemployment benefit data. The four-week moving average of seasonally adjusted initial jobless claims now stands at 755,750, according to Dec. 3 data from the Bureau of Labor Statistics. While that is down considerably from multimillion-claim weeks at the height of the economic crisis, it is still more than three times pre-virus levels. The fact that this number is so elevated so deep into the crisis could suggest that job market gains have stalled, Bovino said, especially as companies operate under renewed restrictions or shut down entirely.

A dark winter

A number of localities, including Los Angeles, New York City, Detroit and Baltimore, have re-imposed partial shutdown measures as the pandemic roared back into life in recent months following a lull in the summer. There have been 14 million recorded cases of COVID-19 and deaths from the virus are almost 274,000, according to Johns Hopkins University data.

Experts expect cases to continue to rise, especially following the millions of Americans traveling and gathering for the Thanksgiving and Christmas holidays. This, coupled with colder weather, likely means further pain for the leisure and hospitality, tourism, and food and beverage sectors, which will likely see a downturn in revenue and may be forced to enact more temporary or permanent layoffs.

Oxford Economics researchers see these negative factors coming together faster than most other economists, projecting that the job losses have already arrived. The research company expects a decline of 60,000 non-farm payrolls in November, the first negative number since April. The company attributes much of this to an estimated 150,000-job decline in public employment due to the shedding of state and local education jobs. Another 45,000 would be lost in retail, mainly due to the lack of typical temporary holiday hiring at brick-and-mortar stores.

This projection of a stalled recovery in the labor market is a "worrisome" leveling off in economic activity heading into 2021, said Kathy Bostjancic, Oxford's chief U.S. financial economist.

But the rollout of a COVID-19 vaccine could help not only with overall economic recovery, but also for hiring, especially in the consumer-facing sectors.

"There is still a lot of trouble for businesses finding workers, even with more than 10 million out of work," House said. "You've seen labor shortages in part because of the health risk involved in these jobs. A wider [vaccine] rollout could help with hiring — that's the unique aspect of this recovery."

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