The US economy added a meagre 245,000 jobs in November and the unemployment rate fell to 6.7 per cent, as the labour market lost momentum in the face of the latest surge in coronavirus cases.
The data released on Friday by the US labour department will fuel fears of a sharp slowdown in the world’s largest economy. It comes in the midst of a new push in Congress for a fiscal stimulus package to help small businesses, the unemployed and state and local governments weather the latest wave of infections, after months of stalled negotiations.
The jobs report could also influence the thinking at the Federal Reserve, where officials are debating whether to add monetary support to the economy by making changes to the asset purchase programme.
After losing more than 22.2m jobs at the start of the pandemic, employers started bringing back jobs rapidly in the late spring and summer. But the recovery started to slow in the autumn, with the economy adding back 711,000 jobs in September and 610,000 jobs in October.
Economists had expected another month of slower job creation in November, but the dip was far larger than forecast. There are still 9.8m Americans without work compared with February.
Some sectors shed jobs in November. After adding 95,100 positions in October, retailers lost 34,700 jobs. The government lost an additional 99,000 positions, after even bigger job losses the previous two months. In leisure and hospitality, job growth slowed to a trickle, from 270,000 in October to 31,000 last month.
The drop in the unemployment rate from 6.9 per cent to 6.7 per cent would normally be encouraging — but the details were discomforting, since the decline was driven by 400,000 people leaving the labour force. The labour force participation rate fell from 61.7 per cent to 61.5 per cent.
“With Covid cases surging again and policies being put in place to try and slow the spread, hiring has slowed down,” wrote Thomas Simons and Aneta Markowska, economists at Jefferies, in a note. “Also, worker availability is a significant limiting factor as well, with many unable to go to work due to Covid concerns or family care obligations.”
US Treasuries sold off following the release. The yield on the benchmark 10-year note climbed 0.04 percentage points to 0.95 per cent. The dollar, as measured against a handful of other currencies, climbed from lows hit earlier in the day to trade marginally higher after the report.
The data left little impact on equity markets. The S&P 500 climbed 0.4 per cent early in the trading session alongside the tech-heavy Nasdaq Composite.
Investors believe the lacklustre economic data will add much-needed urgency to the stimulus talks. Peter Boockvar, chief investment officer at Bleakley Advisory Group, said the back-up in Treasury yields in part reflected that extra spending was now “locked-in”.
Even if a new stimulus package is passed, the slowdown in the labour market last month highlights the challenge facing Joe Biden, the US president-elect, as he prepares to assume office next month.
Mr Biden has called for large-scale government spending to bolster the recovery from the pandemic and mitigate the adverse impact on lower-income families. But in a divided Congress, with Republicans sceptical of his plans, it is far from clear that Mr Biden will succeed in implementing those policies.
“Whether or not we see a double-dip recession in the US depends on the interplay between the severity of the shutdowns and their impact on the economy over the winter and the size of potential stimulus from Congress and the Federal Reserve,” said James McDonald, chief executive and chief investment officer of Hercules Investments, based in Los Angeles.
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