November employment data in the US worse than expected

Last Friday, employment data in the United States revealed a worsening of conditions during the month of November. The Non-Farm Payroll (NFP) report only shows the creation of 245,000 new jobs, half of what the market expected. 

This is one of the key reports for each month, as the US economy is the largest in the world. For this reason, what happens in that country also affects other markets.

November NFP report details

In addition to not meeting expectations, the report reveals worsening conditions. We have been in a pandemic for six months and the world’s largest economy still has millions of unemployed or people who are living thanks to unemployment benefits.

The main problem and one of the key aspects refers to permanent unemployment. Unfortunately, the upward trend has not changed during the month of November. Instead, permanent unemployment has caused 4.7 million Americans to lose their jobs permanently, and the rise is faster now compared to the previous two recessions.

Another negative aspect of Friday’s report is the length of unemployment time. The report shows that one in two individuals has been unemployed for more than 15 weeks. Moreover, 37% of these have been unemployed for almost thirty weeks.

Finally, last month’s data has been revised downward. Therefore, we can say that the NFP report indicates the weakness of the economy that continues to depend on fiscal and monetary stimuli.

Despite poor economic data, the rally in equity markets continues. This kind of divergence is expected to continue in 2021 for at least a few reasons.

First, the new Washington administration has more fiscal stimulus as the top priority on its agenda. We do not know exactly what form this stimulus will take, but if it is financed with a higher debt issue by the Treasury, then the downward trend of the US dollar will continue.

Second, the Fed has promised to keep interest rates low for as long as necessary. It even plans to expand the quantitative easing program and announce it next week. As a result, the yield curve remains downward and investors will have little or no alternative to place their capital unless it is in the stock market.

Third, the negative news about the pandemic may have already been valued by the market. However, this is not the case for recovery, so investors are trying to position themselves early to take advantage of the expected rebound.

Still, these very high stock market prices should find more support from the economy. The increase in permanent unemployment continues to be a serious problem since the economy cannot function solely on the basis of stimuli.

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