BBVA Research Releases Economic Analysis: Strong Labor Market Report In November Amid Growing Uncertainty

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Industry-level job gains continue to be concentrated in the service sector, with non-farm payrolls increasing by 271,000 in leisure and hospitality. According to the analysis, 58% of the jobs lost due to the pandemic in the leisure and hospitality industry have returned. However, employment remains 3.5 million below pre-pandemic levels. Other substantial gains were recorded in professional business services, retail trade, and health care and social assistance. The report further notes that improving economic activity and demand for housing pushed up employment in construction, transportation and warehousing, as well as manufacturing during the month.

The analysis, co-authored by BBVA Chief Economist Nathaniel Karp and Senior Economist Boyd Nash-Stacey, highlights the reverse of decreases in weekly hours from previous months, with all major industries except education and health care recording a gain. Likewise, weekly earnings posted a strong monthly gain of 0.4%, implying an increase of 4.7% in the past 12 months.

The report says the jobs report suggests that labor market conditions will continue to improve, albeit at a slower pace. While the team’s benchmark assumes more modest labor market gains going forward, the larger-than-expected drop in the unemployment rate suggests it could fall below our current benchmark of 7.1%. by the end of the year.

That being said, the balance of risk is tilted down with an alarming number of new cases of Covid-19, as well as new lockdowns abroad and the enormous uncertainty associated with the 2020 election, which could remain. unresolved for some time. The increase in the number of COVID-19 cases may also increase the propensity of individuals to move away, whether or not there are mandatory lockdown measures. Without additional budget support, the analysis indicates that the downside risks to the labor market in 4Q20 will continue to grow.

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