The recent six-month growth in U.S. nonfarm payroll employment has closely matched the trend observed from 2010 to 2019, which averaged 190 thousand jobs added per month. In comparison, one year ago, an average of 376 thousand jobs were generated every six months, while the first half of 2023 saw an average of 257 thousand jobs added.
The latest November result (199 thousand) is not out of the general trend.
The Impact of COVID-19 on Employment
The high rate of job growth in 2020 - 2022 is driven by the magnitude of the COVID lockout failure when 22 million jobs were lost in a couple of months (the biggest shock in U.S. history). It took almost two years for employment to recover (it surpassed pre-crisis levels in June 2022).
Employment Growth Since July 2022
Since July 2022, employment has grown by 4.7 million jobs, and the deviation from the 2010 - 2019 trend has stabilized at a deficit of 3.9 million.
Taking into account the balance of vacancies, labor market structure, economic structure, and labor productivity, the deviation of the current number of employed from the required number is about 3.5 - 3.7 million people, which provokes above-trend inflation.
Compression of this deficit is hardly possible, both for demographic reasons and because of the shift in the labor market structure, when the share of rent income (real estate, asset market) increases, which washes out the labor force from the labor market to rentiers.
The shortage of employed people can be compensated either by demand reduction or by productivity growth, which can be realized with the participation of AI.
The employment structure shows that the main driver of employment growth from May 2020 is now downsizing (information, logistics, and warehousing).
High rates of employment growth from January 2023 are observed in the sectors lagging in the post-quota recovery until December 2022 - mining, health care, cultural, sports and entertainment, hospitality and catering, and consumer services. That said, the latter two sectors have never recovered (employment is lower than in February 2020).
There are no signals of a crisis, but there are signs of a slide into recession, as measured by manufacturing, trade, transportation, and business services.
Conclusion
Overall, recent U.S. nonfarm employment trends are largely similar to those before the pandemic, but a deficit of 3.5 - 3.7 million jobs persists, contributing to above-trend inflation. Closing this deficit is challenging due to demographic and labor market changes, so productivity gains from artificial intelligence may be required. Some sectors are recovering while others are lagging and there are hints of a possible recession, especially in manufacturing, trade, transportation and business services. Continuous monitoring and adaptable policies are critical to manage these economic dynamics.