Ugh.
So, we’ve gone back and forth on the jobs status the last few months – first from the delta wave, then the lack of a delta wave, and now November’s report, which was seriously far below expectations. We only added 210k jobs in November, down from the 546k we added in October, and well below expectations for 573k new jobs. Even though we missed on the job creation, we did manage to bring the unemployment rate down to 4.2%, down 0.4% from the prior month.
Moral of the story: At this point, we’ve recovered all but 3.6m jobs that were lost during the pandemic. A lot of companies also learned how to do more with less in the last 20 months, which begs the question – how many of the jobs we lost are just no longer needed and therefore not coming back? Anyway, this report is also a bit scary because it doesn’t even include any impacts from the omicron wave that’s headed our way through the holiday season – barring unforeseen circumstances, I’d expect the December report to be even softer because of the newest wave of COVID worries.
On the ground
The underlying manufacturing and services industries posted strong months in November. Last month’s ISM Manufacturing Index came in at 61.1, up 0.3 from the prior month, while the ISM Services Index came in at 69.1, up 2.4 from the prior month and marking a new all-time-high. Both parts of the economy have been reporting strong demand but labor shortages and supply chain bottlenecks dampening their ability to actually meet that demand. We’re finally starting to see the first signs that those issues are starting to back off – not resolved by any means but the beginning of the end seems to be underway.
Moral of the story: This is going to be the key to resolving a lot of our inflation issues – once we can actually produce enough (when we have enough inputs and labor) to meet demand, we’ll start to see prices normalize. For everyone’s sake, hopefully that’s sooner rather than later.
Fed speak
Federal Reserve Chairman Jerome Powell, who was just rehired by President Biden for a second term, testified in front of Congress this week. His testimony indicated two big pieces of “new news” for the markets – the Fed’s changed its tune on inflation being “transitory” (read: they don’t think it’s going away in the near future) and, in response, the Fed is likely to stop flooding the market with cheap money sooner rather than later. The other wrench in managing policy right now is the emergence of this new Omicron variant – in all honesty we just don’t know enough about it to understand its economic impact, but it’s an added layer of uncertainty, and markets hate uncertainty. In response, we’ve had a wild week of very volatile trading, and I’m thankful to have a two-day break before restarting the chaos again on Monday morning.
Moral of the story: The Fed taking its foot off the accommodative policy gas pedal was like taking Christmas gifts away from a child on Christmas morning – markets threw a bit of a tantrum. It didn’t help that the market’s been also trying to grapple with what is happening with this Omicron variant.