December 3, 2021

.Private sector employment rose by 235 thousand in November which was far less than the expected increase of 550 thousand. This compares to an increase of 628 thousand in October and 424 thousand in September.  But this is only one piece of the story.  Payroll employment measures the number of workers that are on a company’s payrolls.  It does NOT include self-employed workers.  In November civilian employment, which is derived from the data used to calculate the unemployment rate, rose an astonishing 1,136 thousand. There are always differences  between the two measures of employment on a monthly basis.  They are, after all, calculated from different surveys.  But the month-to-month differences are never this large.  Over time the two surveys seem to show roughly comparable gains in employment.  But the difference this time cannot  be explained by month to month wiggles.  Since the recession ended in April of last year payroll employment has risen by 18,450 thousand.  Civilian employment, which includes self-employed workers, has risen by 21,805 thousand.  Thus, it appears that the number of self-employed workers has risen by perhaps 3.5 million workers in the 19 months since the recession ended.  People seem to be tired of working for somebody else in a sometimes dirty or hostile work environment, and being underpaid while the bosses earn tons of money, Thus, the pandemic and the recession has created a dramatic change in the labor market.

In addition to hiring people, businesses can also lengthen the hours of existing employees.  The nonfarm workweek rose 0.1 hour in November to 34.8 hours after having fallen 0.1 hour in October.  If employers cannot find enough bodies to hire, an alternative is to ask their existing employees to work somewhat longer hours.  It has been bouncing around at a high level for months.

This shift in the labor market seems to explain why job openings are at a record high level and not getting filled.  People would prefer to work for themselves than work for somebody else.

The changes in  employment and hours worked are reflected in the aggregate hours index which rose 0.5% in November to 110.7 after rising 0.3% in October.  This index seems on track to increase 5.1% in the fourth quarter which, given a  moderate increase in productivity, should produce an 8.0% GDP growth rate in that quarter.

The demand side of the economy remains robust but the problem is that the production side of the economy is struggling to find enough workers to satisfy demand and work around significant delays in getting the materials necessary for production.

Jobs in the leisure and hospitality industries where employment  increased  23 thousand in November after increasing 170 thousand in October.  Employment in this sector is still 1.4 million below the February 2020 pre-recession level.

Elsewhere, jobs in the retail sector fell 20 thousand .  Manufacturing employment rose by 31 thousand.  Construction employment climbed by 31 thousand.   Health care and social services employment gained 6 thousand.  Info tech jobs  were unchanged.  Transportation and warehousing gained 50 thousand.  Professional and business services climbed by 90 thousand.   Financial sector jobs increase 21 thousand.  Public sector education employment  fell by 16 thousand while private sector education employment fell by 2 thousand.

Given these employment gains we expect GDP growth of 8.0% in the fourth quarter and 4.9% in 2022..

Stephen Slifer

NumberNomics

Charleston, S.C.

Private sector employment rose by 604 thousand in October but the August  and September data were revised upwards.  August revised upwards from a gain of 332 thousand to an increase of 504 thousand and September rose 365 thousand versus 317 thousand previously.  Given that federal unemployment benefits expired after labor day, some previously unemployed workers are gradually finding their way back to jobs.

In addition to hiring people, businesses can also lengthen the hours of existing employees.  The nonfarm workweek fell  hour in October to 34.7 hours.  If employers cannot find enough bodies to hire, an alternative is to ask their existing employees to work somewhat longer hours.  It has been bouncing around at a high level for months.

Even with the more sizeable employment gain in October, firms are still unable to hire as many as people as they need as evidenced by the record level of job openings.  As COVID continues to retreat workers will gradually emerge from their homes and once again begin to look for jobs and, at last, firms may be able to hire more of those workers that they desperately need.

The changes in  employment and hours worked are reflected in the aggregate hours index which rose 0.2% in October after having jumped 0.9% in September.  This index seems on track to increase 5.9% in the fourth quarter which, given a  moderate increase in productivity, should produce an 8.0% GDP growth rate in that quarter.

The demand side of the economy remains robust but the problem is that the production side of the economy is struggling to find enough workers to satisfy demand and work around significant delays in getting the materials necessary for production.

Jobs in the leisure and hospitality industries where employment  increased  164 thousand in October after climbing 88 thousand in September.  As COVID slows this category should continue to climb.  Employment in this sector is still 1.4 million below the February 2020 pre-recession level.

Elsewhere, jobs in the retail sector rose 35 thousand .  Manufacturing employment jumped by 60 thousand.  Construction employment climbed by 44 thousand.   Health care and social services employment gained 47 thousand.  Info tech jobs rose 32 thousand.  Transportation and warehousing gained 54 thousand.  Professional and business services climbed by 100 thousand.   Financial sector jobs increase 21 thousand.  Public sector education employment  fell by 65 thousand while private sector education employment rose by 17 thousand.

Given these employment gains we expect GDP growth of 8.0% in the fourth quarter and 5.5% in 2022..

Stephen Slifer

NumberNomics

Charleston, S.C.