US jobs data of November – What does it indicate?

30 Dec 2022 , 03:19 PM

In November 2022 US economy added 263,000 non-farm payroll jobs. Total non-farm employment in the country stood at 153.5 million at the end of November. Unemployment rate in the month stood at 3.7%. Number of unemployed persons in the country, as per US Bureau of Labor statistics, in November stood at 6 million or 60 lakhs. Unemployment rate in the country now stands at par with the rate in December 2019. It is well below the 14.8% unemployment at the peak of Covid lockdowns, in May 2020.

November Jobs data report shows that a significant damage that lockdowns have done is to lower the labor participation rate of the US economy. Labor participation rate is the percentage of working age population of a country that is working or is looking for work. In November, labor force participation rate of US stood at 62.1%. This is 1.3% lower than the labor participation rate of the economy in February 2020, just before the Covid lockdowns were imposed. The economic output of an economy is a function of output per worker and number of workers. So if number of workers goes down without any change in output per worker then GDP growth rate of the economy will go down.  This figure indicates that medium – and long- term growth rate of the economy may get lowered because of the long disruptions caused by Covid lockdowns. Investors will be well-advised to revalue US stocks, in the context of a lower medium- and long-term economic growth scenario. A lower growth rate for the US economy will also result in lower growth rate of the global economy. 

Average monthly new job additions in United States in 2022, is 282,000. In 2021, this number was 562,000.  88,000 jobs were created in the leisure and hospitality sector in November. This sector was the worst hit by Covid lockdowns.  Total employment in this sector is still less by 980,000 from the pre-pandemic level of February 2020. This indicates to the extent of damage that has been caused to this sector by Covid lockdowns, and the extent of recovery that still needs to be done. 14,000 new jobs were added in the manufacturing sector in the month of November. Number of jobs created in retail sector was -30,000. The negative number means that the retail sector saw net job losses instead of net job additions in the month. This may be an indication of weakening of consumption in the US economy. Some of the consumption is interest sensitive. So the adverse impact of consecutive rate hikes by US Central Bank may have been felt by this sector.

On a month-on-month basis, hourly wage inflation stood at 18 cents or 0.6%. On a year-on-year basis it stood at 5.1%. This number shows the broader ineffectiveness of US Central Bank’s hawkish stand on inflation. Wage inflation continues to remain high in the economy. It will in turn keep on fueling price inflation. Higher wages of employees is transferred in the form of higher prices for goods and services.