November Jobs Report Reveals Signs of Trouble
When unemployment began to quickly shrink over the summer as governments loosened up on the economic lockdowns in response to COVID-19, everybody got giddy and assumed we were in for a quick recovery. But we’ve been saying that the quick turnaround was an illusion and that the lockdowns caused deep wounds in the labor market. The numbers are starting to hint at this reality.
The November non-farm payroll report revealed a slowing labor market recovery. Unemployment ticked down from 6.9% to 6.7%, but the economy only added 245,000 jobs last month. This was far below the 500,000 economists were projecting.
The economy lost about 22 million jobs in the early months of the pandemic. It has recovered about 12.3 million jobs, leaving 10.7 million Americans still unemployed. That compares with about 5.8 million in February. Permanent job losses stand at 3.7 million, about the same as the previous month.
As Peter Schiff pointed out in his podcast, it’s important to remember that the “job creation” reported by the Labor Department doesn’t actually reflect “new” jobs.
It’s not really that these jobs are being created. They’re really being recreated, right? These are jobs that we used to have that were lost because of COVID and now the businesses are recalling their workers. To say we’re creating half-a-million jobs, the economy isn’t really doing that.”
The mainstream tried to put a positive spin on the report because of the drop in unemployment. But if you actually look into the numbers, the unemployment rate is primarily being driven lower by an exodus of people from the labor force.
In order to be counted as unemployed in the statistics, you have to be actively looking for work. According to the Labor Department, about 400,000 people dropped out of the labor force in November and the labor force participation rate went down from 61.7% to 61.5%.
Peter said he thinks the exodus will continue and the labor participation rate will fall below 60 percent sometime next year.
That’s a lot of people who are no longer productive but that are out there spending. The rest of us are going to have to subsidize the people who are not working and yet who are still consuming. They’re not producing, yet they’re buying a lot of stuff, and so the rest of us have to support them one way or another. The way it’s going to be is through inflation.”
Peter went on to say he thinks 2021 will be the year Americans really begin to experience the cost of all this “free” government.
We got all the bailouts, all the stimulus – the cost is going to be felt by the average American in his pocketbook because the cost of living is going to go up.”
Even with rising wages, Americans still won’t be able to keep up. Average hourly earnings were up 4.4% year-on-year in November. Peter said this increase in wages is actually reflecting inflation.
Businesses are paying more. Maybe they have fewer people that they’re employing, but they’re paying them more, not less. So, the cost of hiring people is going up. The cost of everything is going up. If we really have this weak economy with all these unemployed people, labor should be cheaper, not more expensive. But of course, it’s not. The cost of getting people to go to work is going up.”
It doesn’t help the generous unemployment benefits push up the cost of labor. Businesses have to compete with Uncle Sam’s handouts. A lot of people would rather sit at home and collect a government check than go to work.
In order to entice people into the workforce, you got to pay up. And so the cost of hiring people is going up just like the cost of everything else is going to be going up. This is inflation. Or it is inflation that is driving all these price increases.”
There really isn’t any reason to think the job market will substantively improve in the near-term. Many states are shutting down again due to the surge in COVID cases. And as we reported last month, nearly 1-in-10 companies said they were planning layoffs through the last three months of 2020. That was on top of the more than a quarter of US companies that had already let workers go in Q4.
And Americans continue to file for unemployment at record levels. There were another 712,000 new unemployment claims in the last week of November. And that was considered good news because it was less than the 787,000 claims the week before. It was the first decrease in claims in three weeks. To put the number into perspective, weekly unemployment claims set a record in March. Nine months later and we have yet to fall below the previous record set during the Great Recession.
The prospect of a V-shaped recovery still appears to be more myth than reality.