Over two million workers lost their unemployment claims yesterday.
And now to make matters worse, the highly anticipated non-farm payrolls were dismal.
In what was a shock, we saw non-farm payrolls generating a mere 9,000 new jobs, which is way below the estimate of 150,000 new jobs.
Moreover, the unemployment rate surged to a surprising 9.8%, well above the estimate of 9.6%.
So, what happened?
The key private ADP Employment Change report came in at a sizzling 93,000 new jobs created in November, nicely above the 58,000 jobs estimated, and the highest reading in three years. The October reading was also revised upwards. The ADP reading is generally viewed as a precursor to the non-farm payrolls reading, so the latter’s results were surprising.
Pundits are blaming the results on seasonal adjustments, declines in manufacturing jobs, and less hiring in retail than expected. Watch the December jobs report to see if there will be adjustments in the November reading.
There are currently around 15.1 million Americans unemployed and struggling to make ends meet.
There is a push to extend the unemployment claims period, and I fully expect this to occur given the weak results. First-time claims for the week ending November 26 edged higher to 436,000, above the estimate of 422,000 and above the revised 410,000 the week earlier. The 410,000 reading was incredible and unexpected. But, for a healthy jobs market, the key level to watch for is 400,000 or below.
At this point, the government will need to extend jobs benefits and continue to look for ways of generating new jobs.
With over four million workers claiming benefits and 15.1 million officially unemployed, there continues to be significant hurt in the jobs area.
The problem is that jobs drive confidence and this gives consumers a reason to spend, especially on non-essential goods and services. The November Durable Goods were weak, which clearly indicates a hesitancy to spend.
And when consumers do not spend, there is a domino effect down the line. In economics, this is known as the “multiplier effect,” where a dollar spent results in more spending. For instance, you spend a dollar at the store. That dollar is used to pay workers, who in turn spend. This cycle continues and is a major driver of total spending in the economy.
This is why jobs are so important for increasing consumer spending and driving the economy. And this is why the jobs report was a major disappointment.
Let’s hope that December will provide a stronger report.