Category: Economy

Workers quit their jobs in record numbers in November while the total employment openings pulled back a bit, the Labor Department reported Tuesday.

The so-called quits level surged to 4.53 million for the month, according to the department’s Job Openings and Labor Turnover Survey. That represented an 8.9% increase from October and broke September’s high-water mark of 4.36 million. As a percentage of the workforce, the quits rate of 3% matched September’s mark.

In a phenomenon that has been labeled the Great Resignation, workers have been leaving their positions partly in response to increased mobility in the labor market as job openings strongly outnumber those looking for work.

For November, the number of job openings totaled 10.56 million, lower than the 11 million estimate from FactSet and a decline from 11.09 million in October. The level, however, was well ahead of the 6.88 million total of those out of work and looking for jobs in November, according to the government’s nonfarm payrolls report for that month.

The job openings rate was 6.6%, down from about 7% in October but well ahead of the 4.5% from the prior year.

“The Great Resignation shows no sign of abating, with quits hitting a new record. The question is why, and the answers are for starkly different reasons,” said Robert Frick, corporate economist at Navy Federal Credit Union. “COVID-19 burnout and fear are continuing, but also, many Americans have the confidence to quit given the high level of job openings and rising pay.”

A separate economic report Tuesday showed that manufacturing activity in December was slower than expected.

The ISM Manufacturing Index registered a 58.7% reading, below the 60% expectation and a drop from 61.1% in November.

The biggest subtractions from the index came in supplier deliveries, which fell 7.3 percentage points, and a surprise plunge in prices, which dropped 14.2 percentage points at a time when inflation is running at its highest level in nearly 40 years. Survey responses indicated prices are declining some for steel and oil.

A reading over 50% signals the manufacturing sector is expanding in general, while a reading under 50% is a sign it is mainly contracting.

On the upside, the employment index rose to 54.2%, a gain of 0.9 percentage point and a sign that hiring remains strong.

The JOLTS report showed, though, that there are some displacements happening in the labor market.

At an industry level, the openings rate in leisure and hospitality slid to 8.7% from 10.1%, due a drop in accommodation and food services to 8.9% from 10.5%. The hire rate in leisure and hospitality edged higher to 8.1% but the quits rate jumped a full percentage point to 6.4%.

The health-care and social assistance industry also showed stress as Covid cases surged, with the quits rate in that field hitting 3% for the month, the highest on record.

The report comes three days before the Labor Department releases its closely watched nonfarm payrolls count for December. Economists surveyed by Dow Jones expect growth of 422,000 jobs and the unemployment rate to nudge lower to 4.1%.

Clarification: This story has been updated to clarify that the quits level represented an 8.9% increase from October.

WASHINGTON – Northrop Grumman CEO Kathy Warden said the ongoing labor shortage plaguing the nation was a primary focus for America’s defense business.

“When I think about the challenges that we all might face going into next year, the labor shortages that we’re seeing are suddenly one that’s top of mind,” Warden told CNBC’s Morgan Brennan in an exclusive interview on the sidelines of the Reagan National Defense Forum in Simi Valley, California.

“We have seen an increase in demand for the kinds of skills that we need to support our work at the same time that we’ve seen labor participation rates go down,” Warden said, adding that workforce was her “primary focus” in 2022.

Warden’s comments come on the heels of a jobs report that shows the U.S. economy created far fewer jobs than expected in November. In an address Friday, President Joe Biden glossed over the nation’s weak jobs report and instead focused on the low unemployment rate, which fell from 4.6% to 4.2%.

Warden also expressed concerns about ongoing disruptions to the global supply chain, triggered in part, by the coronavirus pandemic.

Along with labor shortages, Warden said that the defense giant saw shipping delays and chip shortages during its third quarter, in alignment with rising infection rates due to the emergence of the Delta variant. When asked about the Omicron variant, Warden explained that the defense industry will adhere to a playbook developed over the course of the coronavirus pandemic.

“We’ll continue to navigate through these COVID-related impacts,” she said, adding, “The industry has been able to do that over the last 21 months and we anticipate we’ll be able to do that going forward.”

Year-to-date the company’s stock price has jumped about 20%.

The U.S. economy created far fewer jobs than expected in November, in a sign that hiring started to slow even ahead of the new Covid threat, the Labor Department reported Friday.

Nonfarm payrolls increased by just 210,000 for the month, though the unemployment rate fell sharply to 4.2% from 4.6%, even though the labor force participation rate increased for the month to 61.8%, its highest level since March 2020.

The Dow Jones estimate was for 573,000 new jobs and a jobless level of 4.5% for an economy beset by a chronic labor shortage.

A more encompassing measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons dropped even more, tumbling to 7.8% from 8.3%. The household survey painted a brighter picture, with an addition of 1.1 million jobs as the labor force increased by 594,000.

“This report is a tale of two surveys,” said Nick Bunker, economic research director at jobs placement site Indeed. “The household survey shows accelerating employment gains, workers returning to the labor force, and low levels of involuntary part-time work. The payroll survey shows a significant deceleration in job growth, particularly in COVID-affected sectors.”

“The underlying momentum of the labor market is still strong, but this month shows more uncertainty than expected,” he added.

Leisure and hospitality, which includes bars, restaurants, hotels and similar businesses, saw a gain of just 23,000 after being a leading job creator for much of the recovery. Though the sector has regained nearly 7 million of the jobs lost at the depths of the pandemic, it remains about 1.3 million below its February 2020 level, with an unemployment rate stuck at 7.5%.

Following the disappointment, markets initially shrugged off the numbers, but then turned negative after the open.

Initial jobs tallies this year have seen substantial revisions, with months showing low counts initially often bumped higher. The October and September estimates were moved up a combined 82,000 in the report released Friday.

Sectors showing the biggest gains in November included professional and business services (90,000), transportation and warehousing (50,000) and construction (31,000). Even with the holiday shopping season approaching, retail saw a decline of 20,000.

Worker wages climbed for the month, rising 0.26% in November and 4.8% from a year ago. Both numbers were slightly below estimates.

Policymakers have been watching the employment figures closely to gauge how close the economy is to a full recovery from the depths of the pandemic. The U.S. suffered its shortest but steepest recession in the early days of the Covid-19 breakout and has been on a progressive but volatile path since.

Federal Reserve officials put a new wrinkle into the picture this week when they indicated that the measures they instituted to support growth could be coming to an end sooner than expected.

In congressional testimony earlier in the week, Fed Chairman Jerome Powell said he expects the central bank’s policy committee to discuss at its meeting this month stepping up the level at which it is tapering its monthly bond purchases. Powell said he sees the unwinding to conclude “a few months” sooner than expected, a move that would open the possibility for interest rate hikes.

“The disappointing 210,000 gain in non-farm payrolls in November suggests the labor market recovery was faltering even before the potential impact of the new Omicron variant, possibly as a result of the rising infection rates in the Northeast and Midwest,” wrote Andrew Hunter, senior U.S. economist at Capital Economics. “Nevertheless, the Fed will still push ahead with its plans to accelerate the pace of its QE taper at this month’s FOMC meeting.”

San Francisco Fed President Mary Daly backed up Powell’s comments in remarks Thursday, saying that inflation that is stronger and more durable than expected is creating the need to rethink policy. She said the Fed should “at least, you know, think about raising the interest rate” and accelerating the taper pace.

Daly also hinted that the summary of economic projections to be released this month, in which officials show their expectations for the future, likely will point to interest rate hikes pulled forward into 2022. Markets currently expect the Fed to enact at least two quarter-percentage point increases next year.

St. Louis Fed President James Bullard added to the chorus on Friday, saying the economy as measured by GDP has recovered fully and can operate with less policy stimulus, particularly considering the pace at which inflation is running.

“These considerations suggest, on balance, that the Federal Open Market Committee should remove monetary policy accommodation,” Bullard said.

Job growth is expected to have been strong in November, and employers likely continued to boost wages to attract and retain workers in an incredibly tight labor market.

Economists expect 573,000 jobs were created last month, up from 531,000 in October, according to Dow Jones. The unemployment rate is expected to have declined to 4.5% from 4.6%, and average hourly wages are expected to have increased by 0.4% on a monthly basis, or 5% year over year.

“It looks like it was a really good month, and we’ll see if we can sustain it, with some pullback, which is natural with concerns about omicron,” said Diane Swonk, chief economist at Grant Thornton. “But at the moment, we’re still coming off what was an incredible month, especially for travel and tourism.”

The jobs data, expected Friday at 8:30 a.m. ET, will be an important input for the Federal Reserve at its Dec. 14 and 15 meeting. Earlier this week, Fed Chairman Jerome Powell said the central bank could speed up the tapering of its $120 billion a month bond-buying program, which it put in place to prop up the economy during the pandemic. The Fed will discuss the acceleration at its December meeting, he said.

Full employment is one of the Fed’s dual mandates, so economists will be closely watching the participation rate in the November report to see if it rises. This metric is the percentage of the eligible workforce that is employed or actively seeking work, and it was 61.6% in October.

Swonk expects an above-consensus 750,000 jobs were added in November, and she expects the unemployment rate fell to 4.4%. Swonk said wage growth should be solid, as employers attempt to attract workers in the face of demand from Amazon and other employers that have raised wages.

“It’s a hot job market and there’s a surge in demand that’s like nothing we’ve ever seen,” she said. She noted that job openings are up 55% from the February 2020 level, according to the online jobs site Indeed.

“There’s no immigration. It’s fallen off a cliff. The pandemic has accelerated retirements and hurt participation among some groups that normally need to participate the most,” she said. “It’s far from perfect. It’s a job market that has a collision of demand surging with constraints on supply.”

Wage gains were likely across the board in November. “We’ll see gains on the low end, but the higher end, professional services, is really hot,” Swonk said.

Luke Tilley, chief economist at Wilmington Trust, expects 300,000 jobs were created in November, based on private sector data and the weekly unemployment claims data.

He expects the hiring trend is strong and will remain so.

“Our expectation is 500,000 jobs per month on average over 12 months going forward, but there’s going to be fluctuations, with the virus and ups and downs of different industries,” said Tilley.

Tilley said the Fed will be looking for the reasons behind the jobs report’s weakness or strength, as it tries to assess what will be normal for the labor market post-pandemic. “If it’s weak because there’s still no labor supply, that’s very different for them than weakness because demand is petering out,” he said. “I think the Fed, the FOMC, is probably spending more time getting their arms around what does a full recovery of the labor market mean.”

He said the Fed will have to adjust to a lower participation rate. “That has implications for the unemployment rate and should we even be comparing it to the pre-pandemic unemployment rate,” he said.

But the jobs report will also be judged by investors, with an eye on what it means for Fed policy. Financial markets have been sensitive to any nuances that could help determine the central bank’s timeline on completing its bond-buying program, which now is expected to end in June 2022.

Once the bond purchases end, the door would be open for the Fed to raise interest rate hikes.

Swonk has been expecting the Fed to speed up the tapering of its bond purchases because of higher than expected inflation, so the wage portion of the employment report will also be very important. “We’re not getting a wage price spiral…but that is what the Fed is worried we could get to,” she said.

David Petrosinelli, senior trader at InspereX, said the jobs report will not likely have a big impact on the market unless it is very strong or very weak.

“I think this market is much more cued up for a stronger number, and that tells me rates have some room to run,” he said. Petrosinelli pointed to the yield on the benchmark 10-year Treasury, at 1.44% Thursday afternoon. Yields move opposite price.

“You can look back to last week and that was 1.70%,” he said, referring to the 10-year yield. “I think that was the upper bound there. If you get a really strong number, we could go right back there, albeit bounded by the sideshow of this new variant.”

Yields moved sharply lower after initial reports of the omicron variant of Covid last Friday.

Initial claims for unemployment insurance rose last week but held at levels consistent with how the job market looked before the Covid-19 pandemic devastated the U.S. employment picture, the Labor Department reported Thursday.

First-time filings for the week ended Nov. 27 totaled 222,000, less than the 240,000 Wall Street expected. That was higher than the 194,000 from the previous week, but that total, the lowest since 1969, was revised even further down from the initial 199,000 reported.

The totals are the product of heavy seasonal adjustments, though the unadjusted number was actually lower, at 211,896.

The report comes amid signs of an increasingly tight labor market, with workers leaving their positions for new jobs at the highest level on record and with hiring persisting at a brisk pace.

In addition to the brightened outlook for initial claims, continuing claims fell by another 107,000 and are now below 2 million for the first time since the early days of the pandemic. The last time continuing claims, which run a week behind the headline number, were lower than the current 1.96 million was March 14, 2020.

Virginia and Texas combined to see more than 15,000 fewer claims filed for the week, according to unadjusted data.

Thursday’s report comes a day ahead of the closely watched nonfarm payrolls count from the Bureau of Labor Statistics.

That tally is expected to show an addition of 573,000 new jobs in November, following a gain of 531,000 in October. The unemployment rate is expected to edge lower to 4.5%.

Correction: Jobless claims for the previous week were initially reported as 199,000. An earlier version misstated the figure.

Strong consumer demand sparked a wave of CEO optimism about the economy over the next six months, the Business Roundtable said Wednesday, as it revealed the results of its most recent survey.

But the lobbying group, whose members are CEOs of major American companies, cautioned that the survey was completed before the emergence of the new omicron Covid variant, and that the survey measured only the executives’ plans for the next six months.

The Business Roundtable released its fourth quarter CEO Economic Outlook Survey, revealing its headline index had risen to its highest level in the 20-year history of the survey, hitting a value of 124, which is up 10 points from the third quarter. 

On top of that, CEOs reported their plans for hiring increased 13 points, plans for capital investment increased 7 points and expectations for sales increased 9 points. The group cited the release of enormous pent-up consumer demand as a driver of the optimism in corporate boardrooms.

“This quarter’s survey reflects the encouraging signs we’re seeing with the economic rebound as consumers begin to resume travel and spending,” said Business Roundtable Chairman Doug McMillon, the CEO of Walmart. “Continued progress in defeating the pandemic, including new variants, will be necessary to sustain strong growth into the second half of 2022.”

In their first estimate of 2022 U.S. GDP growth, CEOs projected 3.9% growth for the year.

The Business Roundtable survey also asked CEOs for the cost pressures facing their companies. Forty-eight percent identified labor costs as the top cost pressure, followed by 20% identifying supply chain disruption costs and 17% identifying material costs.

Business Roundtable CEO Josh Bolten spotlighted recent legislation on Capitol Hill as one of the reasons for the executives’ economic optimism.

“The recent bipartisan Infrastructure Investment and Jobs Act, which directs much-needed resources to upgrade our nation’s physical infrastructure and broadband connectivity, is an important investment in the long-term health of the economy,” he said. “As the economy reverts to a normal cadence, sound economic policy can help sustain strong growth over the long term.”

The survey was conducted between Nov. 3 and Nov. 22. The World Health Organization labeled omicron a “variant of concern” on Nov. 26.

Federal Reserve Chairman Jerome Powell believes that the omicron variant of Covid-19 and a recent uptick in coronavirus cases pose a threat to the U.S. economy and muddle an already-uncertain inflation outlook.

“The recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation,” Powell said in remarks he plans to deliver to Senate lawmakers on Tuesday. “Greater concerns about the virus could reduce people’s willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions.”

Treasury Secretary Janet Yellen will join Powell on Tuesday in testifying before the Senate Banking Committee. The Fed chief and Treasury secretary are required to report to Congress each calendar quarter as part of the March 2020 economic-relief legislation that magnified the central bank’s emergency lending programs.

Powell’s remarkets were released by the central bank on Monday evening.

The Fed chief also offered more direct comments on inflation, saying that it’s challenging to forecast the persistence and impact of supply constraints, but that it now appears that “factors pushing inflation upward will linger well into next year.”

He noted that many forecasters, including some at the Fed, predict that inflation will move down “significantly” over the next year as bulked-up supply chains overtake cooling demand for goods.

Powell’s remarks came just days after fears over a new Covid variant drove investors to ditch U.S. stocks and push back their expectations for future Fed rate hikes. The Dow Jones Industrial Average dropped 900 points, or 2.5%, on Friday and clinched its worst session of year on the week’s final day of trading. Markets rebounded some on Monday.

Concerns about the spread and potential impact of the omicron coronavirus variant caused traders on Friday to flock to the relative safety of Treasury bonds and reduce their forecast for future Fed rate hikes.

Last week, about 25% of investors said they thought the Fed would still have interest rates near zero in June 2022, with the other 75% betting the central would have hiked at least once by then, according to the CME Group’s FedWatch tool. That spread has since narrowed thanks in part to the new variant, with some 35% of investors now betting the Fed will still have rates near zero in June 2022.

The yield on the benchmark 10-year Treasury note fell 15 basis points on Friday to 1.49% before bouncing back above 1.5% on Monday. Bond yields fall as their prices rise.

While the Fed ended those lending programs earlier this year, the central bank has only just begun to reduce its $120 billion in monthly purchases of Treasury debt and mortgage securities. The central bank decided at its most-recent policy meeting to taper its regular asset purchases amid widespread supply-chain disruptions and inflation levels not seen in the U.S. since the 1990s.

Critical supply chains are choked off. Demand soars. Prices surge and everyone starts freaking out about inflation and wonder how long it will last.

Is it 1945? 1916? 1974?

The answer, of course, is all of the above, and you can throw 2021 in there as well.

Inflation is not something new for the U.S. as the nation has weathered seven such episodes of lasting price surges since World War II including the current run, which is the strongest in 30 years. Getting out of the pandemic shock has been a difficult exercise for the world’s largest economy, and inflation has been a painful side effect.

But trying to find a historical parallel – and, thus, perhaps a way out – isn’t easy. Virtually every cycle bears at least some similarities to others, but each is unique in its own way.

The most common comparison to these days is the stagflation – low growth, high prices – environment of the 1970s and early ’80s. And while there’s probably at least some validity to that, the reality is more complicated.

“In terms of how widespread inflation is, it’s pretty much touching everything. It’s widespread, or more than what we saw in the 1970s,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “The question is, how long it remains elevated and when it backs off and at what rate does it settle out?”

Most U.S. policymakers reject the 1970s connection.

Leaders such as Federal Reserve Chairman Jerome Powell, Treasury Secretary Janet Yellen and Biden administration officials view inflation as temporary and almost wholly driven by factors unique to the pandemic. Once those factors subside, they see inflation drifting lower, eventually getting around the 2% level the Fed considers emblematic of a healthy and growing economy.

Some White House economists have asserted that the current stretch looks not like the stagflation era, but more like the immediate post-World War II climate, when price controls, supply problems and extraordinary demand fueled double-digit inflation gains that didn’t subside until the late 1940s.

“Today’s shortage of durable goods is similar — a national crisis necessitated disrupting normal production processes,” a team of White House economists wrote in a July 2021 paper. “Instead of redirecting resources to support a war effort, however, manufacturing capabilities were temporarily shut down or reduced to avoid COVID contagion.”

Once the supply chain disruptions are remedied – and there are signs that at least the major ports are becoming less crowded in recent days – “inflation could quickly decline once supply chains are fully online and pent-up demand levels off,” the paper stated.

The idea that inflation is “transitory” – a well-worn term that is transitioning out of vogue – is central to the insistence from fiscal and monetary authorities that excessively easy policy is not to blame for the inflation surge.

However, easy policy has been at the core of many previous cycles, and trying to blame everything on the pandemic hasn’t gone over especially well with consumers, whose confidence is running at decade lows, and on Wall Street, where investors are getting antsy over how long inflation will last.

Whether inflation is temporary, in fact, is probably the biggest debate happening in investing circles these days.

“The debate is always couched in black and white. The reality is, it’s probably in between there,” said Jim Paulsen, chief investment strategist at the Leuthold Group.

In fact, Paulsen has studied inflation over the past century or so and found that while there may been many periods where it has become problematic, there are only two where it proved lasting: after World War I and in the aforementioned 1970s-early ’80s.

He’s largely in the camp that this run, too, will pass as it has been fueled largely by supply chain problems that ultimately will resolve.

Still, he’s wary of being wrong.

“It’s not as temporary as we first thought, but I still think that’s the best odds” that it will pass in the coming months, Paulsen said. “But I’d also say that it is undoubtedly the biggest risk that it’s not. If it’s not, then it’s a disastrous outcome not only for stocks but also for the economy if it’s truly runaway.”

The inflation danger comes because this cycle is unlike any other in one important way: Policymakers have never thrown anything close to this amount of money at the economy.

While President Joe Biden and Yellen have insisted that all the fiscal and monetary stimulus is not the underlying cause of inflation, the argument that nearly $10 trillion between Congress and the Fed hasn’t pushed prices higher is hard to swallow for some.

Even though Paulsen believes the present conditions will fade in 2022, he worries about what he calls “global synchronized abuse of policy.” In essence, the meaning is that policymakers remain in emergency posture for an economic picture that seems long past crisis stage, with the potential for boiling over should officials continue to turn up the heat.

Still, he also sees declining commodity prices – with oil at the center – as well as falling shipping costs and the lessening of clogs at the ports as hopeful signs that inflation will, at least in historical terms, prove temporary.

“What if sometime next year we not only declare pseudo-victory over Covid, but we declare it over inflation, too?” Paulsen said.

The emergence of a new Covid variant in South Africa complicates both questions. Even Powell, Bush and others in the inflation-is-transitory camp say that the pandemic has been the root cause of price pressures, so if the new variant turns into a larger threat, that means inflation stays higher for longer.

Beside that, though, most mainstream economists are sticking to the belief that 2022 will say a significant drop in inflation.

Mark Zandi, the chief economist at Moody’s Analytics, feels that way even though he says there are close parallels between the current predicament and the runaway inflation of the 1970s.

For one, he said the waves in that inflation shock were both demand-driven and the product of supply issues because of the oil embargoes back then. Unions that were able to negotiate cost of living increases in contracts also boosted the wage-price spiral.

A sentient Fed also contributed to the problems by taking inflation too lightly and resisting the interest rate hikes that could have slowed the economy.

While Fed policymakers have been slow to tighten in the present day, they have vowed that if inflation expectations become unhinged, they’ll act. The worry, though, is that the Fed is already too late.

“The wage spiral that we suffered back then was because of the COLAs and the explosion if inflation expectations. They did rise and the Fed did not recognize that and did not respond to it,” Zandi said. “Assuming each future wave of the virus is less disruptive, then, yeah, I think we would see signs of moderation.”