November jobs report disappoints with sharp hiring slowdown

American employers added 245,000 new jobs in November, a sharp decrease from October’s downwardly revised 610,000, according to the Bureau of Labor Statistics (BLS).

The underwhelming report is the latest evidence that the progress of labor recovery has stalled. While part of the steep drop can be attributed to the government laying off 93,000 temporary Census workers, private sector hiring plummeted to 344,000 new jobs in November after gaining 877,000 the month prior.

Many key sectors saw their hiring momentum slow. Hiring by goods-producing companies fell from 107,000 in October to 55,000 in November — a dropoff of 48.6% month over month. Among such companies, construction businesses, which had seen job gains rise from 35,000 in September to 72,000 in October, added just 27,000 jobs in November. Manufacturing took a step back as well, from 33,000 new jobs in October to 27,000 last month.

Hiring within service industries slowed to a higher degree, falling 62.5% from 770,000 new jobs in October to 289,000 in November. Notably, retail trade went from adding 95,100 jobs in October to losing 34,700 in November, after accounting for seasonality. Meanwhile, the leisure and hospitality segment continues to bear much of the economic brunt of the COVID-19 crisis, adding just 31,000 new jobs, lowest since January.

Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association (MBA), did observe that despite the big monthly downshift, the three-month hiring average remains solid.

“Over the last three months, private sector job gains have averaged 717,000 per month, a slowdown from the rapid recovery over the summer, but still an impressive pace,” he said. “However, the pace of improvement is clearly slowing in the face of an uptick in the intensity of COVID-19 cases and the mitigation efforts to slow the spread. Certain segments of the economy — particularly in-person service sector jobs — are going to be slower to come back from this environment.”

Not all sectors saw negative job growth. With COVID cases on the rise and more consumers opting to shop online during the holidays, hiring in transportation and warehousing continued to pick up. The segment’s November additions (145,000) more than doubled those in October (62,000).

With the broad slowdown in hiring, Zillow economist Matthew Speakman noted that, at the current hiring rate, S&P Global doesn’t expect employment to return to last year’s levels until at least 2023.

“And while the unemployment rate fell further in November (to 6.7% from 6.9% the month prior), it did so for the wrong reasons: More people left the labor force — the number of adults neither working nor looking to find a job increased by 560,000 in November from October,” Speakman pointed out.

“This figure, and the fact that so many people have been unemployed for more than 27 weeks, suggests many are giving up on looking for new employment — a major threat to the longer-term health of the U.S. economy.”

Taking the date of BLS survey into account, November’s disappointing report may be a bellwether of negative job growth in the near term, said Wells Fargo Securities’ Economics Group.

“The survey week spanned Nov. 8-14, before many of the latest COVID restrictions and more voluntary efforts to stay at home,” Wells Fargo said. “A further moderation in hiring is therefore likely in December, with real potential for payrolls to decline outright next month.”

Despite this, however, Wells Fargo economists are optimistic that labor recovery could once again speed up within a couple of quarters.

“Vaccines are in sight and the odds of additional fiscal support are rising,” Wells Fargo said. “In addition, even as the share of permanent job losers rises, the number of unemployed workers on temporary layoff remains high at 26%, so a significant share of the jobless remain connected to their employers.

“Hiring is likely in for a fitful few months, but should begin strengthening again in the spring.”