November 2020 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed non-farm employers added 245,000 jobs in November (less than half of the 500,000 expected). Also, September and October employment changes were revised up by a combined 11,000 (September: +39,000; October: -28,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) fell (-0.2 percentage point) to 6.7% as shrinkage in the labor force (-400,000) overwhelmed the decline in the number of employed persons (-74,000).

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Observations from the employment reports include:

* Changes in the establishment (+245,000 jobs) and household surveys (-74,000 employed) were not well correlated. 

* Goods-producing industries gained a mere 55,000 jobs, while service-providing employment added a somewhat more robust 190,000 jobs -- especially transportation and warehousing (+145,000), professional and business services (+60,000), and health care (+46,000). Employment in government declined (-86,000), driven by a loss of 93,000 temporary 2020 Census workers. Manufacturing expanded by 27,000 jobs. That result conflicts with the Institute for Supply Management’s (ISM) manufacturing employment sub-index, which contracted in November. Wood Products employment ticked up by 500 (ISM increased); Paper and Paper Products: +600 (ISM decreased); Construction: +27,000 (ISM increased).

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* The number of employment-age persons not in the labor force rose (560,000) to 100.6 million. As a result, the employment-population ratio (EPR) slipped to 57.3%; i.e., nearly six in 10 of the employment-age population is presently employed. 

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* Because the civilian labor force shrank by 400,000 in November, the labor force participation rate retreated (-0.2 PP) to 61.5%. Average hourly earnings of all private employees gained $0.09 to $29.58, resulting in a 4.4% year-over-year increase. For all production and nonsupervisory employees (pictured above), hourly wages rose by $0.07, to $24.87 (+4.5% YoY). Since the average workweek for all employees on private nonfarm payrolls was unchanged at 34.8 hours, average weekly earnings increased by $3.13, to $1,029.38 (+8.0% YoY). With the consumer price index running at an annual rate of +1.2% in October, whether consumers are keeping up with price inflation depends primarily upon whether or not they are working.

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* Full-time jobs rose (+752,000) to 124.3 million. Workers employed part time for economic reasons (shown in the graph above) -- e.g., slack work or business conditions, or could find only part-time work -- slid by 23,000, whereas those working part time for non-economic reasons dropped by 786,000; multiple-job holders retreated by 103,000. 

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For a “sanity test” of the employment numbers, we consult employment withholding taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in November rose by $8.3 billion, to $194.7 billion (+4.3% MoM; -2.9% YoY). To reduce some of the monthly volatility and determine broader trends, we average the most recent three months of data and estimate a percentage change from the same months in the previous year. The average of the three months ending November was 3.2% below the year-earlier average. As we have previously mentioned, President Trump’s executive order deferring certain payroll obligations through December 31, 2020 complicates comparisons with earlier data.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.