Payrolls rise least since spring, unemployment, participation rates down

Nonfarm payrolls rose 245,000 in November after a downwardly revised 610,000 gain in October, first reported as a 638,000 increase.

The unemployment rate fell to 6.7% from 6.9%, and the labor force participation rate slipped to 61.5% from 61.7%. Average hourly earnings rose 0.3% in November, more than the 0.1% expected by economists.

The jobs added missed expectations of economists polled by IFR Markets, who expected 500,000 new jobs, while the unemployment rate was below the 6.8% projection.

“The jobs report stands as a stark reminder that we remain in the middle of a pandemic and while COVID fatigue is setting in, the third wave of restrictions has and will continue to impact the labor markets,” according to Marvin Loh, senior global macro strategist at State Street.

“The market is looking through most of these concerns however, as it is looking past short-term pain towards a vaccine-driven return to normalization and the revitalized stimulus discussion,” Marvin Loh, senior global macro strategist at State Street said.

Calling the numbers “a disappointment,” he noted these were the “slowest monthly gain since coming out of the lockdowns in the past spring.”

And it will get worse. “Since COVID cases were just starting to spike in the middle of November when the jobs data was calculated, it did not include the full impact of the current lockdowns,” Loh said. “The weak report is therefore a precursor to an even weaker December report, which may see jobs contractions as lockdowns become more widespread.”

The decline in the unemployment rate and rise in average hourly earnings are skewed because of the decline in the participation rate, he said.

“The market is looking through most of these concerns however, as it is looking past short-term pain towards a vaccine-driven return to normalization and the revitalized stimulus discussion,” Loh said.

The slowdown that has been expected is now here, said Fitch chief economist Brian Coulton. "We have been waiting for signs of a slowdown for a while but they’ve actually been quite elusive — up to now,” he said. “The weakness in retail and part of the leisure sector hints at some effect from tighter social distancing restrictions but the jobs slowdown is also a sign of the economy having already come back a long way. Private job gains were still robust and with employment up by 0.2% month on month its increasingly likely that fourth quarter GDP will be positive."

The slowdown in jobs added was in part related to a decline in government jobs related to the census count, according to Mortgage Bankers Association Chief Economist Mike Fratantoni, “but also reflecting a slowdown in private sector job growth.”

Residential construction jobs rose, he added, “another sign that the strong housing market continues to lead the overall economy.”

And despite the drop in the unemployment rate, aided by a decrease in the labor force participation rate, Fratantoni noted, 10.7 million people remain out of work, with “an increasing number of long-term unemployed — those out of work for more than 26 weeks.”

Employment won’t recover to last year’s numbers before 2023, according to S&P Global Ratings Chief Economist Paul Gruenwald.

Separately, the trade deficit rose to $63.1 billion in October from a downwardly revised $62.1 billion shortfall in September, first reported as a $63.9 billion deficit.

Economists expected a $64.8 billion deficit.

Also released Friday, factory orders rose 1.0% in October after a 1.3% gain in September.

Economists expected a 0.8% rise.

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