While payrolls in the USA increased by 245K, which is expected to increase by 460K in November, the expected unemployment rate decreased to 6.7%. While the net revision of the previous two months was 11K, the private sector increased by 344K after the 877K increase in the previous month. The private sector was expected to create 540K jobs. Employment growth appears to be the lowest in recent months due to the coronavirus pandemic and efforts to contain it. While certain industries are still recruiting, it’s worth mentioning that momentum is at the slowest level in recent months.
If we look at the sub items; Significant business gains occurred in November in shipping, warehousing, professional and commercial services, and healthcare. Employment decreased in the public sector and retail trade. There is a 27K employment increase in the construction sector, but the total employment level in this sector is 279K below February. There is a similar situation in the manufacturing sector, which has increased employment by 27,000, 15K in motor vehicles and parts, 5K in plastic and rubber products, but total manufacturing employment is 599K lower than in February. There is a 15K increase in financial activities. In the public sector, when the effect of temporary employment is removed, as we expected after the elections, there is a decrease of 99K, which is due to the elimination of temporary officials employed for the 2020 Presidential election counts. The retail industry has also lost 35,000 jobs, especially with the effect of pandemic closures on store basis.
In November, 14.8 million people reported that they were unable to work due to their employers closing or losing their jobs due to the pandemic, meaning they did not work at all or worked fewer hours at any point in the past 4 weeks. The number of those who were not looking for a job in November due to the pandemic and therefore not included in the workforce rose to approximately 3.9 million. Labor force participation rate declined to 61.5% in November; this is 1.9 points below the February level. The ratio of those who are considered unemployed to the labor force is decreasing, but the labor pool is also shrinking and some unemployment turns into long-term unemployment.
Due to deteriorating employment dynamics, households do not have enough time to wait for the vaccine to come and save them. Expectations on the financial package will increase, which is important for the two parties to re-focus on negotiations before Congress, at least to see that there is progress and intent. The Fed will not wait any longer in this environment, we will see them become aggressive at the December meeting, and they will face the market, at least with qualitative adjustments.
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