The slowest month of U.S. job growth since the coronavirus crisis began could signal the start of sustained slowness or even employment losses, strengthening the push for more fiscal relief from lawmakers as the U.S. enters a dark winter of rising coronavirus cases ahead of widespread vaccine distribution.
Just 245,000 jobs were added in November, according to the U.S. Bureau of Labor Statistics, well below the Econoday consensus estimate of 500,000, while the U.S. unemployment rate ticked down to 6.7%, from 6.9% a month earlier. Despite seven consecutive months of jobs gains, total U.S. employment is still down by almost 10 million jobs since February.
"Labor market growth is decelerating very quickly, so consensus forecasts likely overstated job growth simply because COVID is expanding at a very rapid rate," Michael Hicks, an economics professor at Ball State University, said in an interview. "This means a combination of weakened economic activity, poor weather that will limit some of the face-to-face services that were so badly affected by COVID, and a large share of workers facing healthcare and childcare issues."
The "disappointing" figures leave the U.S. in a "troubling situation" with additional coronavirus cases, hospitalizations and partial shutdowns coming each week, said James Knightley, chief international economist for ING Economics. This only makes the need for federal fiscal support more pressing, he said.
California Gov. Gavin Newsom said Dec. 3 that the state would ban gatherings and nonessential activities for three weeks if intensive care units reach 85% capacity in a given region. Under that scenario, offices, hotels, bars and hair salons would be closed, while restaurants would be open for just takeout and delivery. New York City, Detroit and Baltimore are among the other major localities to implement partial restrictions and business closures as daily new coronavirus cases topped 217,000 and deaths topped 2,800 on Dec. 3.
"It is much weaker than expected based on other labor market surveys," Knightley said in an interview. The 35,000-job drop in retail — attributed largely to halts in seasonal brick-and-mortar hiring — and limited growth in leisure and hospitality suggest that the rising cases, rate of hospitalizations and intensifying containment measures are leading to both consumer caution and weaker demand while also making it too onerous for many businesses to remain open, Knightley said. Small businesses are particularly at risk of layoffs or closures as restrictions mount amid rising COVID-19 cases, he added.
Lawmakers have been at an impasse over additional fiscal relief since passing the $2.2 trillion coronavirus aid package in March, though cautious optimism has surfaced around a $908 billion bipartisan package introduced this month. House Speaker Nancy Pelosi, D-Calif., and Sen. Majority Leader Mitch McConnell, R-Ky., reportedly spoke by phone on the package, which would provide $288 billion in small business aid, $160 billion to state and local governments, and $45 billion for the transportation sector, including airlines.
Robert Kaplan, the president of the Federal Reserve Bank of Dallas, has cautioned that "growth could stall out" if fiscal relief is not injected into the U.S. economy soon. The U.S. is roughly three weeks from the end of key provisions in the March coronavirus relief package, which will end benefits for more than 14 million workers.
"That shock to personal income should be weighing on hiring decisions by firms last month and in this month," Hicks said. "So not only was November's jobs report deeply concerning, it is almost certain that December's will be as well."
Economists believe that the weak November jobs report is likely just the start of what will be further jobs growth weakening or even job losses in December and other winter months.
Renewed layoffs coupled with cautious hiring and "strong" negative seasonal factors — including the end of employment for temporary U.S. Census Bureau workers hired earlier in the fall ahead of the November election — contributed to the 365,000 drop in jobs added from October, said Gregory Daco, chief U.S. economist for Oxford Economics.
"December is looking soft too, and the January number will depend on the evolution of the pandemic," Daco said in an interview. "At this stage, it's not looking great for an early 2021 pickup in activity, but more policy support could turn things around."
Daco said that while the pending vaccine news signals hopes for a strong recovery in 2021, the real-time data is "much less optimistic." Though economists are in agreement that the recent vaccine news is encouraging, the sheer magnitude of its rollout likely means it will not have a broad impact for several more months, perhaps close to mid-2021.