HomeContributorsFundamental AnalysisUS Labour Market Recovery Inched Forward in November

US Labour Market Recovery Inched Forward in November

  • Payroll employment added 210k jobs in November, disappointing expectations
  • Unemployment rate ticked lower to 4.2%, closer to rate pre-pandemic
  • Inadequate labour supply adding pressure to wage growth

Payroll employment rose by 210k in November in the US, disappointing consensus expectations for another half a million gain to build on a 470k average pace of increase over the prior 3 months. Hiring momentum among close-contact service industries stalled in November ahead of the holidays, despite a still large shortfall in jobs versus pre-pandemic levels. Leisure and hospitality posted a small gain (+23k) and retail saw an outright decline (-20k). Notable gains instead were seen in professional and business services (+90k) and transportation and warehousing (+50k), the latter remains one of the only few industries to have recouped all of the pandemic losses.

From the separately released household survey, the unemployment rate fell lower to 4.2% and the labour force participation rate ticked up to 61.8% but was still much lower than the +63% rate pre-pandemic. Indeed, insufficient inflow into the labour force, coupled with sky-high job openings has put significant upward pressure on wage growth in recent months. And that’s particularly true among a few services industries where labour shortages have been more acute. Average hourly earnings were 5% higher in November comparing to the beginning of this year for all private industries, but 13.7% higher for leisure and hospitality and 8.9% higher for transportation and warehousing.

Despite a 2.4 million shortfall in the size of the labour force relative to pre-pandemic, it is still difficult to see a large amount of ‘hidden’ unemployment. The gap between the benchmark unemployment rate (U3) and broader measure of labour force utilization like the U6 – which includes workers who want a job but aren’t counted as ‘unemployed’ because they were not actively looking for work – has declined to levels closer to pre-pandemic already. That implies many of those who have left the labour force simply do not wish to come back. A large part of that can be tied to aging demographics and early retirement. Health-related concerns have likely played a role as well. On that front, the “Omicron” variant that has been rattling equity and commodity markets could risk exacerbating the existing supply crunch, and remains a risk to the near-term growth outlook. But barring much more significant disruptions than are currently expected from the new variant, we expect the Fed to start hiking rates in Q3 2022.

RBC Financial Group
RBC Financial Grouphttp://www.rbc.com/
The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.

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