The US labor market sent mixed signals in November, adding only 210,000 jobs but recording a dramatic decline in the unemployment rate, an increase in the labor force participation rate, and a large increase in employment in the household survey. The disconnect may reflect measurement errors and could be revised over time.
Talk of people quitting their jobs, known as "the Great Resignation," may give the impression that employment is low. That is not the case. Since last December, the US labor market has added an average of 550,000 jobs per month and kept pace with 2021 forecasts, even with a limited supply of labor.
On the other hand, the labor force participation rate remains lower than its pre-pandemic level and well below expectations. Aging and ongoing high levels of unemployment account for around half of the total decline, but it is not clear what is behind the rest of the shortfall.
Even though the supply of labor has been limited, greater than expected labor demand has driven job growth over the past year. This trend suggests the economy should be able to create jobs at a faster pace if labor force participation rises and other aspects of the labor market return to normal patterns.
This PIIE Chart is based on Jason Furman and Wilson Powell III's blog, US met forecasts for job growth in 2021 amid unexpected high labor demand and low labor supply.