Hiring slowed sharply in November, with employers adding just 210,000 jobs, and COVID-19 related hurdles are clouding the outlook for the labor market in the months ahead.
But the unemployment rate, which is calculated from a different survey, fell from 4.6% to 4.2%, and nearly 600,000 people streamed into the workforce, the Labor Department said Friday. That development could ease persistent labor shortages that have constrained job growth this year.
Still, last month's job gains fell far short of the 545,000 that economists had expected.. And the disappointing payroll gain doesn't reflect last week's discovery of COVID's omicron variant in South Africa, which happened too late in the month to affect the employment survey.
But infection rates have been rising in the Northeast and Midwest, a trend that might have dampened advances in those regions, says economist Andrew Hunter of Capital Economics.
Meanwhile, the omicron variant and President Joe Biden's vaccination mandate could muddy the jobs outlook next year, economists say.
So far, though, the labor market has been healthier than the weak November showing suggests. Employers have added an average of 555,000 jobs a month this year as the U.S.continues to dig itself out of the coronavirus recession. Those robust gains have helped the nation recover 18.4 million, or 82%, of the 22.4 million jobs lost early in the pandemic, leaving it about 4 million jobs below its pre-crisis level.
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And big upward revisions to employment totals this year indicate that November's disappointing figure could be moved higher as well, says economist Gus Faucher of PNC Financial Services Group. Gains in September and October were revised up by a total of 82,000 Friday.
Easing worker shortages?
Also, the labor force -- made up of Americans working or looking for jobs -- grew by nearly 600,000, highlighting that many people on the sidelines are returning to an improving job market that's offering higher wages. The share of people over 16 participating in the labor force rose from 61.6% to 61.8%.
That could help ease dire worker shortages.
Employer demand for workers has been strong for months but the labor crunch has held job gains to solid but less-than-blockbuster levels. In September, COVID’s delta variant left many Americans cautious and kept many schools from fully reopening, forcing parents to care for distance learning kids and put off their return to the workplace.
But 81% of Americans over 12 are now fully vaccinated and some children age 5 to 11 also have gotten their first shots, according to the Centers for Disease Control and Prevention. New daily COVID cases have fallen from about 95,000 to 82,000 the past 10 days and from 150,000 since early September despite the recent flare-ups in the Northeast and Midwest. Schools, meanwhile, largely have reopened.
And three months have now passed since the federal government’s enhanced unemployment benefits expired for about 11 million people. As a result, while the share of Americans working or looking for jobs didn’t tick up as expected in September and October, some economists say November's solid labor force gain could foreshadow further advances.
"This (report) looks weaker than expectations on the surface, but, all told, it’s a pretty solid report," says Brian Coulton, chief economist of Fitch Ratings.
Hunter of Capital Economics says the mixed report won’t stop the Federal Reserve from accelerating a winding down of its bond-buying stimulus this month in a bid to clear the way for earlier interest rate hikes next year to curtail an inflation spike.
Unemployment drops
In an interview, Labor Secretary Marty Walsh focused on the longer view.
“Unemployment has dropped a full 2 percentage points since President Biden took office” and nearly 6 million jobs have been created in that period, he said.
"We're looking at the sharpest one-year decline in unemployment ever," Biden told reporters. "America is back to work and our jobs recovery is going very strong."
Some industries recorded healthy advances last month. Professional and business services added 90,000 jobs; transportation and warehousing, 50,000; and construction and manufacturing each added 31,000.
Weak growth in bars, restaurant hiring
Yet leisure and hospitality, which includes restaurants and bars, was hit hardest by the pandemic and has been driving strong payroll gains for many months but added just 23,000 last month.
And retail shed 20,000 jobs after seasonal adjustments that reflect th e outsize gains the industry typically notches in November amid holiday hiring.
A couple of wild cards could darken the job market in coming months, including the omicron variant.
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And Biden’s mandate of employee vaccinations or testing for companies with more than 100 employees will take effect January 4, possibly leading some workers to quit, Hunter says.
Economist Lydia Boussour of Capital Economics says she expects U.S. payrolls to reclaim their pre-COVID level by the second half of next year.
But, she adds, “The path forward could prove bumpier than anticipated.”
Jane Oates, president of WorkingNation, a nonprofit that raises awareness about the challenges facing U.S. workers and a former Labor official overseeing training, says she’s concerned that the share of prime-age workers (25-54) working or looking for jobs is still just 81.8%, compared to 82.9% before the pandemic. The share, though, has edged up from 81.6% since September.
There were some early signs that hiring might have softened in November. Homebase, which supplies payroll software to small businesses, said the number of employees working at the firms declined by 2.7% last month.
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Contributing: Courtney Subramanian and Maureen Groppe
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