On the November Jobs Report: Payrolls vs the Third Wave

November is the least-strong month for jobs recovery since the April bottom. 245,000 payrolls is a big miss versus consensus, but about matched our estimate based on other contemporaneous labor market indicators. The “household survey” was weaker, with a 400,000 shrinkage of the labor force driving the unemployment rate to 6.7%. This corresponds to a backup in social distancing since October as a “third wave” of Covid-19 has arrived. Higher-frequency labor market data, though, does not show the same slowdown. The most reopening-sensitive data such as air passengers and restaurant seatings remains weak, but broader data continues to improve. Authorities and people are increasingly guided by the 85/80 rule, in which 85% of the cases are young people and 80% of the fatalities are older people. The vast majority of workers can stay on the job, risking mostly illness, not death. We don’t expect more government stimulus, and don’t think that it is necessary. Vaccines will be the ultimate stimulus.