Wells Fargo Senior Economist on biggest takeaways from the November Jobs Report

Sarah House, Wells Fargo Senior Economist, joined Yahoo Finance Live to discuss the November jobs report and what it signals for the overall recovery.

Video Transcript

ADAM SHAPIRO: We're going to keep talking about not only the potential for stimulus coming down the pike, but the jobs report and the impact it's having on markets if any. Sarah House is Wells Fargo Senior Economist and joins us now in the [? stream. ?] Good to have you here.

Which do you think is having a bigger impact right now, as we go into the last few minutes of the trading session of this week? Is it that jobs miss? Or is it the potential that, eventually, as ugly as the sausage-making is, DC is going to give us a stimulus bill?

SARAH HOUSE: So I think, when we look at the overall report from today, we saw that, of course, the labor market is losing momentum, and I think, overall, faster than what people were expecting. So you have to remember that this report was taken in the second week of November. So it really came ahead of some of the additional restrictions that we saw in the later end of the month. And so it puts at risk the fact that we could, potentially, even get a negative number for December.

And so I think, when you look at what's happening overall in markets, you are seeing them look through, to some extent, what it means for the chance of additional stimulus and, of course, the fact that the slowdown looks, in large part, like it will be temporary over the next couple of months and that help is on the way in terms of DC lawmakers getting serious about some additional stimulus, as well, of course, the progress we've seen on the vaccine front over the past couple of weeks.

SEANA SMITH: Sarah, you mentioned the fact that we could see a negative number over the next couple of months. When you take into account kind of the extent that the labor market could slow here in the near term, what are you expecting to see just in terms of the potential of job losses?

SARAH HOUSE: Well, I think you'll really see overall numbers, probably, come closer to stalling. So, with the payroll survey, anything, of course, is possible, especially in the winter months when you get some funny seasonals, potential for weather effects of course. But I think, when it really comes down to a sector story, so, of course, you need to look at what areas have been most impacted by the virus and efforts to social distance, some of the additional restrictions that we're seeing coming from state and local governments.

And so I think you do, certainly, have the possibility of outright declines in areas like leisure and hospitality, personal care, so really, really industries that are at the epicenter and heart of this crisis. But I think, when you look at the overall trajectory, it will probably be more of just overall employment moving, more or less, sideways the next couple of months before we see reopenings and better employment in the spring.

ADAM SHAPIRO: What danger is there when we hear this discussion of permanent job loss to not only the economy, but people who are sidelined now? We saw the participation rate fall. That's not a good sign.

SARAH HOUSE: Right, so we did see another drop in the participation rate, which I think really takes the shine off the drop we saw in the unemployment rate. And I think the risk of scarring and, you know, this permanent damage is a real possibility, particularly, as we are far from out of the woods in terms of this overall outlook. But I think that drop in participation is very different than what we saw coming out of the Great Recession for example.

So I think you have-- you have a lot of workers who aren't out of the labor force simply because there aren't enough jobs, but it's because of health concerns or family concerns where they're having to stay home and help their kids through virtual learning. And so I think that, when you see the job opportunities come back and some of the-- and some of these pandemic-specific effects that have led to the drop in participation dissipate, I think that you can see a pretty sharp bounce back in participation, probably not a full recovery, but I think the potential for scarring is, certainly, more limited at this juncture than what we saw coming out of the financial crisis.

SEANA SMITH: Sarah, we talked to Mark Zandi over at Moody's yesterday, and he was saying it will take, actually, about four years until we see a full recovery in the labor market. What are you expecting on that front?

SARAH HOUSE: Yeah, so we're only forecasting right now out through the end of 2022, but, even then, we don't expect employment to recover. And I think part of that has to do with the fact that you see services is hardest hit. And, of course, that's much more labor intensive.

And so, even as you see the economy begin to open up again mid-year next year and services spending pick up, I think there is still some question over how many of those jobs and businesses will those workers be able to go back to, even when they're ready, just given that we still have a ways to go before getting to the other side of the pandemic. So I agree it's still going to take a number of years before we get a full recovery.

ADAM SHAPIRO: Sarah House, Wells Fargo Senior Economist, we appreciate your insight here at Yahoo Finance Live. All the best to you. Have a good weekend.