Another Month of Disappointing Jobs Growth Delivers a Lump of Coal to America’s Workers

December 02, 2021

Key Takeaways:

  • Jobs growth in November 2021 dropped by over 60 percent relative to October and fell far short of expectations. Actual job growth was 210,000 versus an expected 573,000.
  • The unemployment rate fell from 4.6 percent to 4.2 percent, but the employment-to-population ratio remains significantly below its pre-pandemic level, and the labor force participation rate has been nearly stagnant over the past year. Early retirements are not the only reason for the low rate.
  • There are nearly twice as many long-term unemployed individuals today compared to February 2020, suggesting that the labor market recovery may continue to be a slog, especially in the face of policy headwinds from the Big Government Socialism Bill that would discourage work and job creation.

With Americans already struggling with multi-decade high inflation eroding their paychecks and shortages at the store complicating their Christmas shopping, today’s jobs report from the Bureau of Labor Statistics (BLS) will not bring tidings of comfort and joy. After months of disappointment, jobs growth in November fell by over 60 percent relative to October, with the U.S. economy only creating 210,000 net new jobs—far short of the expectation by professional forecasters of 573,000. America is still 7.8 million jobs short of the pre-pandemic trend, and if the recovery were to continue at the current pace, the labor market would stay permanently below that trajectory. At the modestly better but still quite anemic pace of recovery since the passage of the American Rescue Plan Act in March 2021, payroll employment would not fully recover until late 2023. The recovery is also proving quite uneven across different industries. For example, the number of financial activities jobs has more than fully recovered and sits at 30,000 above the pre-pandemic February 2020 level, while manufacturing is still down by 253,000 jobs. The number of retail jobs actually dropped by 20,000 last month despite the arrival of the holiday shopping season.

One modest piece of good news was the decline in the unemployment rate from 4.6 percent to 4.2 percent and a slight uptick in the labor force participation rate—which includes those with jobs or actively looking for work—by 0.2 percentage points. However, as the figure below illustrates, this one-month blip makes barely a dent in what has effectively been stagnant labor force participation over the past year.

Stalled Labor Force Participation

Some have pointed to a surge in early retirements during COVID-19 as a possible reason why labor force participation has been slow to recover. While undoubtedly a factor, the fact that the prime-age (consisting of 25 to 54-year-olds) labor force is still nearly 2.4 million people below its pre-pandemic trend indicates that early retirement does not tell the whole story about why labor force participation remains depressed.

Another key metric—the employment-to-population ratio—remains nearly 2 percentage points below its February 2020 level. Looking at the composition of the unemployed, the number of people on temporary layoff last month was 801,000, which is nearly back to the February 2020 mark of 750,000. Unfortunately, the flip side of the coin is that individuals with permanent job losses number 1.9 million—still almost 50 percent higher than the pre-pandemic number—and the number of people unemployed for 27 weeks or longer is nearly double the February 2020 level. These numbers are particularly relevant for the pace of the labor market recovery because it takes longer for people who permanently lost their job to find new employment relative to people who are merely waiting to get recalled by their employer, and the likelihood of someone finding a new job declines with the duration of unemployment. In other words, the longer someone is unemployed, the harder it gets to find a job.

All together, these data points suggest that the continued labor market recovery may be more of a slog than a race, absent a shift in policy. Unfortunately, the Big Government Socialism Bill proposes to create further headwinds for the recovery by proposing a raft of tax hikes and regulations, as well as a permanent extension of work disincentives. Small businesses and families have one less reason for Christmas cheer.