The economy added only 210,000 jobs in November, according to the Bureau of Labor Statistics, and the unemployment rate fell to 4.2 percent from 4.6 percent.
Economists had predicted a job gain of 535,000 and a drop in the unemployment rate to 4.5 percent.
The release on Friday comes after ADP reported a gain of 534,000 private sector jobs in November, down from 571,000 the previous month.
“It is concerning that we were unable to build on October’s strong numbers, with uncertainty only set to grow as the winter progresses.” “CUNA Mutual Group’s chief economist, Steve Rick, stated. “That said, it’s not entirely surprising that the country fell short this month, with the country preparing to respond to the omicron variant while also dealing with rising inflation and an ongoing supply chain crisis.”
The omicron variant of the coronavirus has already prompted countries to impose new restrictions on international travel and sparked market volatility, with major indices suffering some of their largest losses of the year in recent days.
“It is still too early to see the impact of the omicron variant and how it will impact return-to-office and hiring plans,” said Bill Armstrong, president of Gava Talent Solutions.
Given that the reference week for the BLS survey data was prior to the discovery of omicron, some speculated that data from subsequent months could map the variant’s economic impact.
“The job recovery was in full swing… “Hiring demand is strong, and we know it’s broad-based,” said Andrew Flowers, Appcast’s lead labor economist. “We’ll see if there’s a material effect going forward in December and January,” he said.
“Whenever cases rise, job growth slows, and if cases rise far enough, job growth even reverses,” said Julia Pollak, chief economist at ZipRecruiter. “However, with each subsequent outbreak of the virus, the employment response has shrunk… because we’ve learned how to respond in a more targeted manner.”
Pollak stated that job postings have remained robust, even in fields such as travel that have been hard hit by previous Covid surges, but new restrictions on international travel may change that dynamic. “There’s tremendous pent-up demand for leisure and hospitality,” she said, citing strong gains in this sector in recent months. “These travel restrictions now put that in jeopardy,” she said, referring to Wall Street’s concern about the possibility of an omicron-driven slowdown. “We’ve seen stock prices fall in ‘out and about’ industries,” Pollak said.
Economists predict that omicron will have the greatest impact on the labor force participation rate, which is currently low. “The real issue is… can we change the labor force participation rate meaningfully?” said Ron Hetrick, senior labor economist at Emsi Burning Glass labor market analytics firm. “That is the main thing that is holding us back.”
Earlier this week, Federal Reserve Chairman Jerome Powell expressed surprise that participation did not rebound as expected after extended unemployment benefits expired and schools reopened.
“Even when we introduced vaccines, labor force participation remained constant,” Hetrick explained. “The primary concern is what it will take for these people to engage meaningfully.”
A low labor-force participation rate affects wages and, by extension, inflation. With fewer workers to fill job openings, businesses must raise pay to compete, then raise prices to keep up with expenses, a phenomenon economists refer to as a wage-price spiral.
To the extent that omicron makes people less able or willing to re-enter the labor force, the variant may add fuel to the inflationary fire.
“If it is a concern, I would anticipate a decrease in labor supply in the December jobs report.” “It will have an effect,” Flowers predicted. “How much inflation is seeping into wage growth — that could be an early warning sign of a wage-price spiral ahead,” he said.