December 2021 National Economic Outlook

Discount Weak Headline November Jobs Number; Very Modest Boost from Infrastructure Bill

Executive Summary

The U.S. economy added just 210,000 jobs in November, according to a survey of employers from the Bureau of Labor Statistics, well below the consensus expectation of 500,000. However, job growth was revised higher in September and October by a combined 82,000. BLS revisions to job growth in recent months have been upward, and much larger than normal. 

  • The unemployment rate fell to 4.2% in November from 4.6% in October, even with a large increase in the labor force. 
  • The unemployment rate, which was 3.5% in February 2020 before the pandemic, soared to 14.8% in April 2020 and has been steadily falling since then.
  • Employment from a survey of households, different from the survey of employers, rose by a huge 1.136 million in November, the largest increase since October 2020. 

Although the headline November jobs number was disappointing, the overall report was much better. In recent months the BLS has been consistently revising job growth much higher as more complete employer records become available, and the big jump in November employment in the household survey also indicates that an upward revision is likely.

In November President Biden signed the Bipartisan Infrastructure Law, allocating $1 trillion in spending ($550 billion of it new) over the next decade for roads and bridges, ports, water systems, broadband, and other projects. The bill is financed through a repackaging of unspent COVID-19 relief funds, stricter tax enforcement, and additional federal borrowing of about $260 billion over the next ten years. 

PNC’s December forecast includes the impact of the new law. The spending will not kick in in earnest for a few years and is spread out over a number of years, so the new law will have only a modest impact on near-term economic growth. Congress continues to work on a larger social services bill, the Build Back Better Bill, but its potential impact is not included in the current PNC forecast.

Real GDP increased 2.1% at an annualized rate in the third quarter, according to the Bureau of Economic Analysis, much weaker than the annualized pace of 6.5% in the first half of the year. 

The Delta variant weighed on consumer activity in the third quarter. In addition, supply-chain disruptions were drags on consumer purchases of durable goods; homebuilding, because of shortages of building materials; business fixed investment; and business inventory accumulation. Those categories will turn into big positives for growth in 2022 as supply-chain disruptions fade.

Our economics team is consistently analyzing and forecasting national, regional and global economic trends.

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