A November Employment Surge

Payroll employment is expected to rise by 750,000 in November, the strongest pace since July. Gains are expected to be broad-based. Travel and tourism picked up ahead of Thanksgiving, while retailers pulled forward some hiring to deal with an earlier-than-usual start to the holiday season. John Deere workers were still on strike during the week of the survey for payroll employment, which will shave 10,000 from manufacturing employment but gains elsewhere should offset those losses. Vehicle producers are up and running again with the backlog on computer chips dissipating.

The real issues affecting employment are education and child care, which, along with more reliable school schedules, are needed for a lot of single mothers to return to the labor market. Some schools were forced to close early during the Thanksgiving holiday because of a lack of teachers and support staff. The Chicago public schools have begun to pay bonuses to substitute teachers to get them to work more hours and fill gaps left by COVID. Most public school districts saved money and are flush with cash from the most recent stimulus package and surges in real estate revenues triggered by the housing boom. They need to allocate those funds to better compete with the private sector for workers. Public sector wage gains severely lagged private sector wage gains in the third quarter.

Average hourly earnings are expected to rise 0.4% in November and increase 5% from a year ago. The upward pressure on wages in the leisure and hospitality sector is expected to remain strong and is beginning to push up wages elsewhere in the economy.

Separately, the unemployment rate is expected to drop to 4.4%, a new pandemic low. The participation rate is expected to remain unchanged, as working parents are still having a tough time making their way back into jobs, although there is some evidence that men in lower wage households are opting to care for young children as their partners return to work they lost during the crisis. We will also be watching those working multiple jobs. As of October, multiple job holders had fallen by about a million, which is more a testimony to how bad things were for low-wage workers during the best of the last expansion than an unwillingness to work.

The key is whether the gains we see in November can be maintained. Another Delta wave, which likely gained momentum during the Thanksgiving travel surge and the unknown risks associated with the new variant Omicron, is expected to dampen travel and tourism in December and early January.

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