Spiking Covid Cases Slow Job Growth - Dec 7, 2020

The economy added 245,000 jobs in November but slowed from October (Figure 1), as rising Covid cases hampered economic activity amid increased restrictions on businesses. The unemployment rate fell from 6.9% in October to 6.7% last month. 

Fifty-six percent of the total jobs lost since the recession began have returned (US BLS). It’s far better than expected versus earlier forecasts. Nonetheless, the damage to the labor market caused by the Covid Recession is likely to linger.

The labor force (those working full time or part time PLUS the unemployed that are actively looking for work) has declined by 4 million from February’s peak (Figure 2).

If one is retired, a non-working student, a stay-at-home mom/dad, or discouraged and not actively looking for work, they are not counted in the labor force.

Figure 2 highlights the decline in the labor force from February’s peak of nearly 165 million. For various reasons, many who were let go earlier in the year are not searching for new jobs.

What does this tell us? In part, the decline in the labor force paints a better picture of the job market than the 6.7% jobless rate suggests. Put another way, the unemployment rate would be higher if the labor force were at February’s level.

The slowdown in November job growth argues for more assistance to businesses that are being hindered by lockdowns and restrictions, especially since these restrictions are government imposed. Yet, major stock market indexes finished the week at new highs on optimism over the new Covid vaccines and the latest talk of compromise on a new stimulus bill.

Still, injections for the virus won’t be immediately available to everyone.

With new vaccines, hard-hit sectors such as leisure, hospitality, travel, and the broad-based service sector have a fighting chance to recover next year. Success is dependent on FDA approval, as well as acceptance by the public and a quick rollout.