Chief Economist Scott Brown discusses current economic conditions.
The November Employment Reports was a bit disappointing. Nonfarm payrolls rose by 245,000 (vs. a median forecast of 485,000). The increase was held back by the loss of 93,000 temporary census workers. State and local government continued to shed workers. Seasonal hiring was much lower this year, which showed up as a decline in adjusted retail jobs. The pace of improvement in the labor market has continued to slow following a sharp pickup in the late spring and summer. The current surge in COVID-19 cases is leading some states government to re-impose restrictions on in-person services, but self-isolation for individuals with health concerns is expected to restrain the recovery into early 2021. The arrival of vaccines should help to boost economic growth and the job market in the second half of the year.
Private-sector payrolls rose by 344,000 in the initial estimate for November, the smallest increase since the recovery in jobs began. The economy added 302,100 retail jobs before seasonal adjustment, compared to 431,900 a year ago. That worked out to a 34,700 decline after seasonal adjustment. Less seasonal hiring should lead to fewer seasonal layoffs in January, adding to that month’s adjusted gain. Weakness in retail hiring was partly offset by gains in supplier deliveries and warehousing in November.
State and local government jobs fell by 13,000, down 1.3 million from February (before the pandemic). Weaker economic growth has reduced tax revenues, adding to budget pressures. State and local government subtracted 0.6 percentage point from GDP growth in the first five years of the recovery from the 2008-09 financial crisis according to Jason Furman, who served as chair of President Obama’s Council of Economic Advisors. Federal support to state and local governments is badly needed, but even with such aid, we would still likely see a restraint on the economic recovery in 2021.