Jobs report shows "creative destruction" has begun

Friday's jobs report was weaker than expected, showing a gain of 245,000 jobs — far short of the expected 450,000 and further short of October's 610,000 — and painted perhaps the clearest picture yet of the seismic shift happening to the U.S. labor market.

What happened: While the headline number was disappointing, the report's most telling negative was the decrease in labor force participation and the increase of 400,000 people who said that they wanted to work but did not look for a job during the month.

• There were 10 million fewer people employed in November than there were in February and at November's pace of jobs growth it will take three years to return to February's employment level.

Don't sleep: "If you want to watch only one indicator to get a sense of what long-term damage the COVID crisis is likely to do to the economy, this is the indicator to watch," AllianceBernstein senior economist Eric Winograd said of labor force participation.

• "The more people who permanently leave the labor force, the bigger the headwind to longer-term growth, and those who are currently out of work increasingly report that their layoffs are permanent rather than temporary."

Permanent job losers accounted for 35% of the 10.7 million unemployed in November and ratings agency S&P Global does not expect U.S. employment to reach its February levels until 2023.

The big picture: "Economies are not going back to their pre-COVID-19 configuration," S&P Global chief economist Paul Gruenwald said in a recent report. "[T]he composition of output will change and this process has already begun."

• "As a result, new firms are starting to form in growth sectors (and exit shrinking ones) and workers are starting to move toward these growth sectors (and away from the shrinking ones), in what is known as 'creative destruction.'"