November Employment Situation Report

Payroll numbers grew by 210,000, but were much lower than expectations. The unemployment rate falls to 4.2 percent.

By Nate Griffin – December 3rd, 2021

The Bureau of Labor Statistics released its Employment Situation report on Friday.

The economic recovery continued in a positive direction as the nation added 210,000 employees in November. But, there are still nearly five million less people employed in the US than before the pandemic.

Other highlights from the report:

• The number of unemployed persons fell by 542,000 to 6.9 million

• The unemployment rate fell by 0.4 percentage points to 4.2 percent, much lower than in April 2020 when it was 14.8 percent.

• The unemployment rate is still higher than in February of 2020, when it was at 3.5 percent.

• Unemployment rate for those with a bachelors degree was 2.3 percent

• 32 percent of unemployed persons were reentrants to the workforce.

One question persists; why did the unemployment rate fall so much when the economy added only 210,000 new jobs?

The unemployment rate can decline for several reasons: when workers find new jobs, or when they fall out of the workforce entirely. Because of this, it can be difficult to understand exactly what is happening within the labor market.

Because the decline in the number of unemployed workers was higher than the number of new jobs created, it is likely that the decline in the unemployment rate is due to some unemployed individuals falling out of the workforce entirely.

Workforce Participation

Workforce participation – calculated as the total workforce population divided by the non-institutional population aged 16 and older – increased slightly from the previous month, and is up 0.3 percent to 61.8 percent from November of 2020.

Prime age employment, the ratio of those employed between 25 and 54 years of age, rose by 0.5 percent to 78.8 percent. This is substantially higher than in April of 2020 when the number was 69.6, but is still 1.6 percentage points lower than pre-pandemic levels.

READ MORE: Economic Signals Remain Mixed

In November, about 2 million people were categorized as "recently unemployed", meaning they had been looking for work for less than 5 weeks. This number is down by 113,000 from October and is very near pre-pandemic levels.

Comparing Recessions

In February of 2020, when many states issued stay-at-home orders, there was a massive and sudden spike in the number of short term unemployed workers. At the peak, there were over 14 million people looking for work, roughly seven times the 2019 average. But by May of '21, that number had fallen to pre-pandemic levels.

During the '08 financial crisis, however, the situation was much different. The increase in newly unemployed workers was much more gradual and prolonged. There wasn't a sudden increase in unemployment like in the most recent recession and the number of newly unemployed workers only rose by about 40 percent, however it remained elevated for years. It wasn't until September of 2012 to come back down to the 2007 average, over 5 years after the start of the recession.

Short term unemployment is a notable number to pay attention to because it feeds into long term unemployment. The economy can absorb only so many jobs at once, and increases in short term unemployment eventually means that long term unemployment will begin to increase.

Long term unemployment, those who have been unemployed 27 weeks or longer, has remained elevated above pre pandemic levels. The US economy has been slow to re-absorb those jobs. The problems with long term unemployment extend beyond just a paycheck, studies have shown that prolonged periods of unemployment can harm mental and physical health.

So, while new initial claims for unemployment are at historic lows, it takes time for employers to hire new workers, even though many businesses are desperate to hire new workers.

The Pew Charitable Trusts recently reported that there are more jobs than job seekers in 42 states. In Nebraska, that ratio is nearly 3 to 1.

Labor shortages, along with strong demand, have helped to create bottlenecks throughout the economy which has caused rising inflationary pressure. Rising oil prices, food prices, and other bottlenecks have helped as well.

According to the Wall Street Journal, Economists are predicting that as these bottlenecks ease, inflation should return to more normal levels.

Even though the labor market is not fully back to normal, the economy overall seems to be on the right track.