WASHINGTON (AP) – The U.S. unemployment rate fell last month to its lowest level since the pandemic, even as employers appeared to slow their hiring – a mixed picture that pointed to a resilient economy that puts more people to work.
The government reported on Friday that private companies and other employers created just 210,000 jobs in November, the smallest monthly gain in nearly a year and less than half of October’s gain of 546,000.
But other data from the report of the Ministry of Labor paints a much brighter picture. The unemployment rate fell from 4.6% to 4.2% as a substantial 1.1 million Americans said they found jobs last month.
The US economy remains threatened by soaring inflation, labor and supply shortages, and the potential impact of the omicron variant of the coronavirus. But for now, Americans are spending freely and the economy is expected to grow at an annual rate of 7% in the last three months of the year, a sharp rebound from the 2.1% pace in the previous quarter, when the delta variant has hampered growth. .
Employers in certain sectors, such as restaurants, bars and hotels, slowed down their hiring sharply in November. In contrast, employment growth remained strong in areas such as transportation and warehousing, which benefit from the growth in e-commerce.
The sharp drop in the unemployment rate was particularly encouraging as it coincided with an influx of half a million job seekers into the workforce, most of whom quickly found work. Normally, many of these people would take a long time to find a job and would be counted as unemployed until they did. The influx of new job seekers, if continued, would help alleviate labor shortages that have plagued many employers since the economy began to recover from the pandemic.
“This is good news for job seekers and workers, as well as businesses,” said Julia Pollak, chief economist of online jobs site ZipRecruiter. “It seems that supply constraints are easing a bit with low unemployment and high wage growth,” two factors that often encourage people to look for work.
The November report reflects a discrepancy between two government-led inquiries. The unemployment rate is calculated from a household survey, which found that an additional 1.1 million people reported having a job last month. A separate survey of employers, known as the Payroll Survey, found that only 210,000 jobs were created last month.
The results of the two surveys usually match over the long term, but can show very different results in a specific month.
The household survey found that the number of unemployed Americans fell to 6.9 million in November, not well above the pre-pandemic number of 5.7 million. And average wages, which have risen as employers try to attract or keep workers, are up 4.8% from a year ago.
Employers have struggled with labor shortages for months because many people who lost their jobs during the pandemic have not, for various reasons, returned to the labor market. But last month, nearly 600,000 people withdrew to look for jobs and were generally hired quickly. The government classifies people as unemployed only if they are actively looking for work.
As a result, the proportion of Americans in the labor force rose from 61.6% to 61.8%, the first significant increase since April. If this long-awaited development continues, it could indicate stronger job growth to come.
Still, the government’s business survey suggested some employers were more cautious about hiring last month. Restaurants, bars and hotels created only 23,000 jobs, up from 170,000 in October. This could reflect the effects of a slight increase in COVID-19 cases last month and a reduction in outdoor meals.
Retailers cut 20,000 jobs, a sign that hiring during the holidays has not been as strong as in previous years. But transportation and warehousing companies added 50,000 jobs, indicating that online retailers and shippers are planning healthy online shopping.
The employment outlook for the coming months has become more blurry with the emergence of the omicron variant. Little is known about omicron, and large-scale business closures are considered unlikely. Still, omicron could discourage some Americans from traveling, shopping and dining out in the coming months and potentially slowing the economy.
The rise in the number of people looking for work is significant because although the unemployment rate has fallen steadily this year, the proportion of Americans who are working or looking for a job has barely budged. A shortage of job seekers tends to limit hiring and forces companies to pay more to attract and retain employees. A higher salary can help support spending and growth. But it can also fuel inflation if companies raise prices to offset their higher labor costs, which they often do.
One of the results is that there are now around 3.6 million fewer people with jobs than there were before the pandemic. Yet only about a third of them are actively looking for work and are classified as unemployed. The remaining two-thirds are no longer looking for a job and are therefore not counted as unemployed.
Whether or not more people start looking for work is a critical question for the Federal Reserve. If the proportion of people in the labor force does not increase much, that would suggest that the Fed is approaching its maximum employment target.
With inflation at a three-decade high and well above the Fed’s annual 2% target, meeting his tenure would increase pressure on President Jerome Powell to raise interest rates as soon as possible. This would make loans more expensive for many individuals and businesses.
About half of those who left the workforce have retired. The other half include parents, mostly mothers, who have stayed home to care for children during school and daycare closings. For some of these women, child care remains unavailable or unaffordable. Other people have become self-employed. And others continue to delay their job searches for fear of contracting COVID-19.