November 2021 Employment Report

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The Bureau of Labor Statistics‘ (BLS) establishment survey showed non-farm employers added a mere 210,000 jobs in November, well below the 545,000 expected). On a brighter note, September and October employment changes were revised up by a combined 82,000 (September: +67,000; October: +15,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) fell by 0.4 percentage point, to 4.2%, as the number of people who found work (+1.136 million) were nearly double the growth in the civilian labor force (+594,000).

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Observations from the employment reports include:

* The establishment (+210,000 jobs) and household surveys (+1,136 million employed) were poorly correlated. Many analysts blame the seasonal-adjustment process, which has been “out of whack” since the start of the pandemic. For November, the seasonal adjustment was more than double the average of the past decade. I.e., seasonal adjustments may have stripped out more job gains than warranted. 

* Goods-producing industries gained 60,000 jobs; service-providers: +175,000. Notable job gains occurred in professional and business services (+90,000), transportation and warehousing (+49.700), construction (+31,000), and manufacturing (+31,000). Declines occurred in retail trade (-20,000) and state and local governments (-27,000) -- especially local education (-12,600).

As mentioned above, manufacturing added 31,000 jobs. That result is consistent with the change in the Institute for Supply Management’s (ISM) manufacturing employment sub-index, which expanded more rapidly in November. Wood Products employment rose by 2,000 (ISM was unchanged); Paper and Paper Products: +2,200 (ISM rose); Construction: +31,000 (ISM fell).

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* The number of employment-age persons not in the labor force contracted (-473,000) to just under 100.0 million. With the labor force expanding, the employment-population ratio (EPR) edged up fractionally to 59.2%; i.e., nearly six out of 10 in the employment-age population are presently employed. 

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* Because the civilian labor force expanded by 594,000 in November, the labor force participation rate also inched up to 61.8%. Average hourly earnings of all private employees increased by $0.08 (to $31.03), and the year-over-year increase settled at +4.8%. For all production and nonsupervisory employees (shown above), the tale was much the same: hourly wages rose by $0.12, to $26.40 (+5.9% YoY). Since the average workweek for all employees on private nonfarm payrolls expanded (0.1 hour) to 34.8 hours, average weekly earnings rose (+$5.87) to $1,079.84 (+2.9% YoY). With the consumer price index running at an annual rate of +6.2% in October, the average worker continues to lose purchasing power.

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* Full-time jobs jumped (+954,000) to 129.3 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 -- retreated by 137,000, along with those working part time for non-economic reasons (-131,000); multiple-job holders rose by 85,000.

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For a “sanity test” of the job 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 increased by $23.5 billion, to $243.7 billion (+10.7% MoM; +25.2% 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 22.9% above the year-earlier average.

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.