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Unemployment Falls to 6.7 Percent, But It Comes With a Longer Work Week

Contrary to normal patterns, the work week has actually gotten longer in the pandemic recession.

An employees bags groceries at a newly opened Amazon Fresh store on Jamboree Road in Irvine, California, on October 22, 2020.

The rebound slowed sharply in November, with the economy adding just 245,000 jobs. This would ordinarily be a very respectable gain, but with the economy still down almost 10 million jobs from the pre-pandemic level, it is not a pace that gets us back to full employment any time soon. If we need 100,000 jobs a month to keep pace with the growth of the labor market, it would take us more than five and half years to get back to full employment at this rate of job growth.

The unemployment rate fell 0.2 percentage points to 6.7 percent in November, however this was entirely due to people leaving the labor force, as employment dropped slightly. The employment-to-population ratio (EPOP) fell by 0.1 percentage points to 57.3 percent.

The decline was entirely among men, who had a drop in labor force participation rates of 0.4 percentage points. Employment rates for men have actually fallen somewhat more over the course of the downturn than for women, with the EPOP for prime age men down by 4.8 percentage points from their year-ago level, compared to a 3.9 percentage points drop among women.

The unemployment rate for Black workers fell by 0.5 percentage points to 10.3 percent, while the EPOP rose by 0.4 percentage points to 54.1 percent. The unemployment rate is 4.7 percentage points higher and the EPOP is 4.7 percentage points lower than the year-ago level. The unemployment rate for Asian Americans fell by 0.9 percentage points, but at 6.7 percent, it is still 0.8 percentage points above the rate for whites, reversing the normal pattern.

Voluntary part-time employment fell by 786,000 in November. It is now 13.5 percent below year-ago levels. This reflects in large part the sharp hit to restaurants and hotels, sectors that employ large numbers of part-time workers.

However, we are also seeing the length of the average workweek increase across sectors. For example, in retail trade the average workweek is 2.0 percent longer than it was a year ago; in education and health services it is 1.2 percent longer. This reverses the normal pattern in recessions as employers typically cut hours as a way to adjust to reduced labor demand rather than laying off workers. In 2009, the length of the average workweek was 1.5 percent shorter (0.5 hours) than it had been in 2007.

Consistent with this pattern of rising hours, we again saw a large increase in the number of long-term unemployed (more than 26 weeks) to 3,941,000, the highest level since November of 2013. This indicates that many of the people who lost their jobs during the spring shutdown still have not gotten them back.

The share of unemployment due to voluntary quits dropped by 0.3 percentage points to 6.7 percent, while this is above the lows hit in the shutdown months, the worst figure in the Great Recession was 5.5 percent. By contrast, 25.9 percent of the unemployed report being on temporary layoffs, a higher level than any pre-pandemic figure.

The job growth figures in the establishment survey were somewhat skewed by the loss of 93,000 jobs for Census workers. However, state and local governments still shed 13,000 jobs, all due to a drop in employment in local government education of 20,700.

On the other side, there was an extraordinary jump of 81,900 jobs in the courier and messenger sector. This increase, together with a 36,800 job gain in warehousing and storage, accounted for just under half of the job growth reported for the month.

Construction and manufacturing both added 27,000 jobs in the month. Employment in these sectors, which are usually hardest hit in a downturn, is now down 3.7 percent and 4.7 percent, respectively, from their pre-pandemic level. Coal mining lost 300 jobs, falling to 44,200, the lowest level on record except for the shutdown months.

Retail lost 34,700 jobs, with most of the drop due to a loss of 20,800 jobs in general merchandise stores. There was a jump of 32,200 jobs in the temp sector, following a gain of 123,000 in October. Health care added 46,000 jobs, with more than half the gain coming from doctors and dentists’ offices. The arts and entertainment sector added 43,100 jobs, although we may see some reversal as the pandemic’s spread forces more closures. The spread has already hit restaurants, which lost 17,400 jobs in November.

The average hourly wage increased at just a 1.8 percent annual rate over just the last three months, compared to a growth rate of more than 3.0 percent pre-pandemic. With slower growth over this period, this now reflects actual wage growth rather than composition effects.

This is a very mixed report. Job growth has slowed sharply by any measure, and with the pandemic spreading rapidly, it seems virtually certain that December will look much worse. With the drop in the labor force participation rate and sharp rise in long-term unemployment, we are getting into a situation where we are likely to see a lasting impact on workers.

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