by Peter Schiff, Schiff Gold:
November had been the weakest jobs report of the year until a meager 199k were announced for December. As shown below, over the last 18 months, only December 2020 was weaker. This was right when the Covid second wave was wreaking havoc and before vaccines became available to the public.
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Figure: 1 Change by sector
This next chart compares the current month with the trailing 12-month average. Every category is lagging the 12-month average by a wide margin except for Construction. A few key takeaways:
- Construction was above trend in December (22k vs 13.4k)
- All Other categories are way below the 12-month trend
- Government lost jobs
- Leisure and Hospitality was 75% below trend with 53k vs 234k
- 4 other categories were more than 50% below trend
Figure: 2 Current vs TTM
Similar to last month, Leisure and Hospitality remain low, possibly indicating a longer-term trend being established. The broader economy had 152.5M people employed as of Feb 2020 and now only has 148.95M. Leisure and Hospitality make up 1.2M of the total 3.55M job losses still outstanding. At the current rate, it would take nearly 2 years for the sector to recover just to pre-pandemic levels. Could some of the slowness be due to Omicron? Sure. But the virus seems to have a much smaller impact on the broader economy compared to previous waves, despite much higher infection rates.
The table below gives a much more detailed breakdown of the numbers and the entire labor force. Some key takeaways:
- For the second straight month, every category outside the government sector was below the three-month average
- The job market is clearly slowing even during the holiday season
- The current month was less than half the TTM Average (199k vs 537k)
- The three-month average in Leisure and Hospitality is 101.7k vs TTM of 213k. This further supports the notion that growth in Leisure Hospitality is slowing.
One other point to note, from 2000-2019 (excluding 2008), October-December is the strongest three-month stretch of the year. This is followed by January-March which is typically the slowest three-month stretch. If this trend holds true, then the numbers are going to get worse in the months ahead.
Figure: 3 Labor Market Detail
This data is subject to revisions as new data becomes available. While the headline release gets a ton of market attention, the revisions get far less. The table below shows the impact of the revisions over different time periods. Please note this is as of the prior month since the most recent month has not seen any revisions. Important items to note:
- Leisure and Hospitality has been revised upwards by 99k over the previous 3 months.
- In aggregate, the entire job picture has been revised up by 113k over the last 3 months on average (341k in total)
These revisions are quite large by any standard. Over the last two decades, monthly job numbers come in around 100k which is about the size of the current revisions.
Figure: 4 Revisions
The chart below shows data going back to 1955. As the labor force has grown in total aggregate numbers, the recessions along the way have caused dips in the general trend. But the trend is still clearly upward.
The COVID recession can be seen as the greatest job market loss. The chart also shows how much work the labor market still requires to regain the employment level seen before COVID (top far right drawdown). As mentioned above, the job market had 152.5M people. That number currently sits at 149M. The job market is still 3.5M people short. At 200k a month, it would take another 18 months for the recovery to reach pre-pandemic levels.
If the job market slows, then this will be even longer. Another factor is where the job market would have been without COVID. Currently much higher than the 152.5M pre-Covid. This means the job market is still way behind.
In the latest period, the unemployment rate fell again from 4.2% to 3.9% (it was 3.5% pre-Covid). This occurred as labor force participation stayed flat at 61.9% (Figure 4).
Figure: 5 Historical Labor Market
The distribution of the workforce has changed significantly over the last 65+ years. For example, in 1955, manufacturing accounted for 30% of jobs vs 8.4% today. Education/Health Care has tripled from 5% to 16%.
Although the unemployment rate has been sharply falling over the last year (chart above), the labor force participation (61.9%) is still well below pre-pandemic levels (63.4%) and much lower than the 66% pre-financial crisis. The current trend has flat-lined.