U.S. Hiring Holds Up While Threats Multiply: Jobs Report Preview
(Bloomberg) -- U.S. employment gains probably slowed only modestly in November despite a record surge of coronavirus cases that still threatens to limit or even reverse hiring in coming months.
Friday’s jobs report will show nonfarm employers added 475,000 people to payrolls and the unemployment rate fell 0.1 percentage point to 6.8%, according to economists surveyed by Bloomberg. While those would be the smallest improvements since the rebound began in May -- and leave the economy 9.6 million jobs short of pre-pandemic levels -- the labor market is in better shape than analysts expected it to be a few months ago.
Forecasters say steady hiring for holiday shipping, easing restrictions on businesses in late October and early November, and strong demand for construction work are likely to deliver a seventh-straight payroll gain. One caveat: payroll figures reflect data through mid-month, meaning jobs lost to subsequent lockdowns won’t show until December or later.
Even if the first jobs report since Joe Biden won the White House does show solid if cooling momentum, he may face a different reality upon taking office in January. In addition to raging infections, precarious businesses like restaurants face colder weather that’s discouraging outdoor dining, and the federal aid outlook remains uncertain.
Federal Reserve Chair Jerome Powell this week urged Congress to approve additional pandemic aid, warning that the economic crisis isn’t over. Policy makers will likely discuss the jobs report when they convene Dec. 15-16 and consider whether to adjust their bond-buying program to provide more stimulus.
While vaccine breakthroughs offer new promise, it may be many months before distribution is wide enough to meaningfully boost demand and affect employment, according to Jay Bryson, chief economist at Wells Fargo & Co.
“Help is on the way, but it’s still a little bit of a race against time,” he said. “There’s going to be near-term weakness in the economy.”
On a positive note, filings for state unemployment benefits fell last week by the most in almost two months, though the figures may partly reflect volatility around the Thanksgiving holiday.
The U.S. saw 4.4 million infections in November, one-third of the nation’s outbreak total. While the surge slowed around the Thanksgiving holiday, millions of gatherings and the busiest air travel days since March may fuel infections that prompt further restrictions and curb hiring. Los Angeles County, the nation’s largest, has ordered its 10 million residents to stay home.
What Bloomberg Economics Says...
“The labor market has started to show signs of strain, with jobless claims moving higher and virus-related lockdown measures being reinstituted as case counts surge, but these factors will be more fully felt in the December data.”
-- Carl Riccadonna, Yelena Shulyatyeva, Andrew Husby and Eliza Winger, economists
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The headline payrolls figure should reflect a reduction of more than 90,000 temporary workers for the decennial Census, which ended counts in October. Without that drag from government, private payroll growth is forecast to be 545,000, following 906,000 in October.
Weak seasonal hiring at retailers may weigh on overall jobs. The raw November figures are typically adjusted lower to account for an influx of holiday workers. In November 2019, retailers boosted payrolls by 431,900 on an unadjusted basis; that became a decline of 13,900 after seasonal adjustments.
“Temporary employees that get hired to work in stores, whether in a mall or a strip shopping center, to a large extent, aren’t happening this year,” said David Berson, chief economist at Nationwide Insurance.
Such headwinds mean temporary labor-market damage is more likely to become permanent, especially for those longest out of work. The ranks of those jobless for at least 27 weeks more than doubled over two months to a six-year high of 3.6 million in October.
November hiring is likely to come from goods-producing sectors rather than services, according to Bloomberg economist Yelena Shulyatyeva. She projects gains in both construction and manufacturing jobs, and gains for warehousing and transportation amid soaring holiday e-commerce demand.
Other data are less upbeat.
The Institute for Supply Management manufacturing employment index in November fell for the first time in seven months.
Private indicators from Homebase, a scheduling tool for 60,000 firms, signal business openings have fallen back to around pre-summer levels. Data from time-clock software maker Ultimate Kronos Group show shift work declined 0.2% in mid-November from a month earlier, the first drop since April.
“What we’re seeing is that downward momentum is exacerbated by the resurgence of the virus,” said Kathy Bostjancic of Oxford Economics, one of two forecasting firms to project a decline in jobs in November in Bloomberg’s survey.
©2020 Bloomberg L.P.