US Non-Farm Payrolls Nov: 210K (Est 550K; Prev 531K) - Big Miss On The Headline Number, But Some Good News If You Dig Deeper - Neil's Summary

US Non-Farm Payrolls Nov: 210K (est 550K; prev 531K)

US Private Payrolls Nov: 235K (est 536K; prev 604K)

- Manufacturing Payrolls Nov: 31K (est 45K; prev 60K)

- Avg Weekly Hours Nov: 34.8 (est 34.7; prev 34.7)

- Labour Force Participation Rate Nov: 61.8% (est 61.6%; prev 61.6%)

US Unemployment Rate Nov: 4.2% (est 4.5%; prev 4.6%)

- Avg Hourly Earnings (M/M) Nov: 0.3% (est 0.4%; prev 0.4%)

- Avg Hourly Earnings (Y/Y) Nov: 4.8% (est 5.0%; prev 4.9%)

The Employment Situation - November 2021 (bls.gov)

Apologize for any typos/mistakes, there's a lot of information in these reports. h/t to @LizAnnSonders, @CalculatedRisk, and The Heisenberg Report for charts.

After a very strong October employer's report (the jobs number most frequently cited, there is also the household survey which was much better this month as we'll discuss), which came after two weaker reports, November flipped back to "weak" (it's important to remember that in any normal year +210k jobs would be great) coming in less than half of October's revised 531k and estimates (550k). This was lower than the worst estimate of 70+ economists of 375k, and the weakest reading since last December. Leisure and hospitality hiring, which showed some glimmers in October, returned to weak again in this report adding just 23k jobs despite remaining 8% below pre-pandemic levels. Retail surprisingly lost -20k. As always, though, you have to take into account seasonal adjustment issues. Unadjusted, we gained 778k jobs in November. Overall services jobs added around 170k while goods around 60k. Luckily, as we'll see there was more to these reports that were more positive.

This was the final jobs report the FOMC will have ahead of their December meeting where they'll decide on an accelerated taper schedule.

Positively, September was revised up by 67k and October by 15k so that added 82k to where we thought we were.

Average weekly hours expanded by one-tenth to 34.8 while average hourly earnings decelerated by one tenth to 0.3% but remained robust (up 4.8% y/y).

In contrast to the mixed data from the employer's report, the household report was much more positive. Most importantly, it showed job gains of over 1.1M. Also, in what was once an afterthought, but has now become "must watch", the participation rate was another positive, increasing to 61.8% from 61.6% and it wasn't for the "wrong" reasons (shrinking labor force) as that increased by nearly 600k, something that will be welcomed by the Fed. And because of the strong job gains, despite the increase in the labor force, the unemployment rate fell to 4.2%, below even the most optimistic estimate.

In that regard, the unemployment rates in the key demographics the Fed is watching (women, Blacks, Latinos) all fell by -0.3, -1.2, and -0.7% respectively.

As you know, I like to look at the two reports separately as they are truly two reports (two different surveys of two different groups - one employers, one households).

Establishment (Employer) Survey

Average workweek increased by one tenth to 34.8 leaving it at historically high levels but off of January's 35.0 high. Average hourly wages rose by 8 cents, the first under ten cent increase since at least April. This was below expectations but still was up 4.8% y/y (0.3% m/m). It was driven by nonsupervisory employees (which were up 12 cents). So wage growth continues to be solid, although it is not inflation adjusted. This bodes positively for continued growth in personal incomes minus transfer payments.

Again this month very few sectors saw job losses (consistent with what we saw with ADP) although as we noted retail surprisingly did. Here's the write-up from the report with the granular detail.

Professional and business services added 90,000 jobs in November. Job gains continued in administrative and waste services (+42,000), although employment in its temporary help services component changed little (+6,000). Job growth also continued in management and technical consulting services (+12,000) and in computer system design and related services (+10,000). Employment in professional and business services overall is 69,000 below its level in February 2020.

Employment in transportation and warehousing increased by 50,000 in November and is 210,000 above its February 2020 level. In November, job gains occurred in couriers and messengers (+27,000) and in warehousing and storage (+9,000).

Construction employment rose by 31,000 in November, following gains of a similar magnitude in the prior 2 months. In November, employment continued to trend up in specialty trade contractors (+13,000), construction of buildings (+10,000), and heavy and civil engineering construction (+8,000). Construction employment is 115,000 below its February 2020 level.

Manufacturing added 31,000 jobs in November. Job gains occurred in miscellaneous durable goods manufacturing (+10,000) and fabricated metal products (+8,000), while motor vehicles and parts lost jobs (-10,000). Employment in machinery declined by 6,000, largely reflecting a strike. Manufacturing employment is down by 253,000 since February 2020.

Employment in financial activities continued to trend up in November (+13,000) and is 30,000 above its February 2020 level. Job growth occurred in securities, commodity contracts, and investments in November (+9,000).

Employment in retail trade declined by 20,000 in November, with job losses in general merchandise stores (-20,000); clothing and clothing accessories stores (-18,000); and sporting goods, hobby, book, and music stores (-9,000). These losses were partially offset by job gains in food and beverage stores (+9,000) and in building material and garden supply stores (+7,000). Retail trade employment is 176,000 lower than in February 2020.

Employment in leisure and hospitality changed little in November (+23,000), following large gains earlier in the year. Leisure and hospitality has added 2.4 million jobs thus far in 2021, but employment in the industry is down by 1.3 million, or 7.9 percent, since February 2020.

Health care employment was about unchanged in November (+2,000). Within the industry, employment in ambulatory health care services continued to trend up (+17,000), while nursing and residential care facilities lost 11,000 jobs. Employment in health care is down by 450,000 since February 2020, with nursing and residential care facilities accounting for nearly all of the loss.

In November, employment showed little change in other major industries, including mining, wholesale trade, information, other services, and public and private education.

Overall we remain 3.9M jobs (or 2.9%) below Feb 2020 levels.

Household Survey

As noted above household survey was better with a 1.14M increase in number of employed after increasing by +359k in October. Number of unemployed fell by -542k. As noted labor force increased by +594k after much more modest increases in the prior five months (of around +175k on average). Hopefully this continues to improve.

This month the number not in the labor force who currently want a job (not counted as unemployed because they were not actively looking for work during the last 4 weeks or were unavailable to take a job - a huge reservoir of potential workers) remained stubbornly around 5.9M. It is around 850k over Feb 2020 levels. Of those 1.2M could not look for work due to the pandemic (which has trended down from the 1.6M level it was at previously (but it was 4.7M in February)). 450k (same as last couple of months but down from 507k in July and 617k in June) believe no jobs are available for them, evidencing some continued job/skill mismatches.

Labor participation rate is one of the keys the Fed has identified and the increase here is positive. In terms of the pandemic influence, it continues to trend down but we still had 3.6M people unable to work all or some hours as a result of its impact (but down from 13.3M in February). This will hopefully continue to improve.

And here is participation rate amongst the key 25-54 demographic which also ticked up to 81.8% from 81.7%.

As noted above the unemployment rates for minorities (particularly women, Blacks and Latinos) which the Fed has highlighted showed some progress:

Among the major worker groups, the unemployment rates for adult men (4.0 percent), adult women (4.0 percent), Whites (3.7 percent), Blacks (6.7 percent), and Hispanics (5.2 percent) declined in November. The jobless rates for teenagers (11.2 percent) and Asians (3.8 percent) showed little change over the month

Those part time for economic reasons remained stalled this month at 4.3M but it is right at Feb 2020 levels so significant further improvements would put us better off than pre-pandemic. The U6 underemployment rate moved down to 7.8% from 8.3% in October, 8.5% in September from 8.8% in August, 9.2% in July and 9.8% in June. So clear progress there. It was 7% though in Feb 2020 (it includes unemployed, part time for economic reasons, and those "marginally attached" to the labor force (not employed or looking but have looked in the last 12 months)), so it has room to move down further.

Permanent job losers declined by -205k to 1.9M but does remain 635k above Feb 2020 levels. As you can see on the chart below, we're well ahead of previous two recessions in terms of permanent job loss recovery. Temporary job losers, fell by a solid -255k to 801k and is now just above the 750k level from Feb 2020. This was 18M in April 2020.

In terms of length of unemployment, long-term unemployed (27+ weeks), which had been declining at a nice clip, stalled at 2.2M this week, representing 32.1% of the unemployed. These remain 1.61 higher than Feb 2020 so work to do there still. Shorter term (less than 14 weeks) fell a little to 3.75M.

Overall, while the headline miss is disappointing, there were a lot of positives. The household survey basically knocked it out of the park. We're continue to see progress in the statistics on the unemployed, and wages are staying very healthy. Also revisions have been to the upside so hopefully that will happen here as well. We have nearly 40% of the available labor force not participating for one reason or another despite companies desperate to hire them, so maybe this was a glimmer of hope in that regard with the increase in participation. Hopefully as we continue to get on top of the Covid situation, schools staying in session, childcare (hopefully) getting back on track, less temptation from high unemployment benefits, full savings accounts, etc., we will continue to make steady progress.

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