The US labor market showed signs of weakening as resurgent virus cases hampered hiring during the month. In all, 245,000 jobs were added in November versus an expected increase of 460,000. The report was weaker than all but 6 of the 78 economists polled. Also worrying, the long-term unemployed increased to 3.9M, and the number of job losses classified as permanent continued to grow. December’s report could show a net loss of jobs as new lockdown measures take hold in many states. The only real positive was the unemployment rate falling from 6.9% to 6.7%, driven by roughly 400,000 employees leaving the workforce during the month.


The equity market seems to be looking past the latest numbers, and for good reasons. First, additional fiscal stimulus is becoming more likely with CARES Act benefits expiring on Dec 31st. Additional support will serve as a bridge for struggling municipal, business, and household budgets still being negatively affected by the pandemic. Secondly, and more importantly, multiple vaccines will be widely available in 2021, which should allow the economy to more fully re-open. The bond market echoes the positive sentiment with higher nominal yields and a steepening yield curve in recent weeks. 


Bottom Line: Short-term economic weakness is being borne out in the latest employment report as the labor recovery slows. The softness will likely continue into December as local municipalities impose additional restrictions on economic activity. While the employment deterioration is concerning, consumers came into the crisis with healthy balance sheets and have maintained excess savings to weather the pandemic’s effects. We remain hopeful that next year could see the highest annual GDP growth rate in more than a decade as pent-up consumer demand is unleashed.