This was another weak report, and the headline number was slightly below consensus forecasts. However there were some positives too: the unemployment rate declined to 8.6% and the payroll employment was revised up for September and October.
There were only 120,000 jobs added in November. There were 140,000 private sector jobs added, and 20,000 government jobs lost.
The change in total employment was revised up for September and October. “The change in total nonfarm payroll employment for September was revised from +158,000 to +210,000, and the change for October was revised from +80,000 to +100,000.”
The household survey showed an increase of 278,000 jobs in November. This increase in the household survey – along with a 315,000 decline in the labor force – pushed the unemployment rate down sharply to 8.6%. The participation rate fell to 64.0%, and the employment population ratio increased to 58.5%. This is the fourth straight monthly increase in the employment population ratio from the low in July at 58.1%.
U-6, an alternate measure of labor underutilization that includes part time workers and marginally attached workers, declined to 15.6% – this remains very high. U-6 was in the 8% range in 2007.
The average workweek was unchanged at 34.3 hours, and average hourly earnings decreased slightly. “The average workweek for all employees on private nonfarm payrolls was unchanged at 34.3 hours in November … Average hourly earnings for all employees on private nonfarm payrolls decreased in November by 2 cents, or 0.1 percent, to $23.18. … Over the past 12 months, average hourly earnings have increased by 1.8 percent.” This is sluggish earnings growth, and earnings are being impacted by the large number of unemployed and marginally employed workers.
Through the first ten months of 2011, the economy has added 1.448 million total non-farm jobs or just 131 thousand per month. This is a better pace of payroll job creation than last year, but the economy still has 6.2 million fewer payroll jobs than at the beginning of the 2007 recession. The economy has added 1.711 million private sector jobs this year, or about 156 thousand per month.
There are a total of 13.3 million Americans unemployed and 5.7 million have been unemployed for more than 6 months. Very grim.
Overall this was another weak employment report and suggests sluggish economic growth.
PERHAPS it’s time to dial back some of the gloom. This week gave us positive news on two fronts. First, the underlying American economy seems to be in reasonably good shape. Second, the biggest risks hanging over the economy—policy errors in America and Europe—receded just a bit. It is not time to declare the all clear. This recovery, having disappointed so many times before, probably will again at some point.
But for now, let’s look at the positive case. America’s Bureau of Labour Statistics reported today that non-farm employment grew 120,000 in November from October and the unemployment rate plunged to 8.6% from 9%, its lowest level since the latter stages of the recession in early 2009. The job growth was a tad below the Wall-Street consensus of 125,000 and well short of what the ADP survey on Wednesday had hinted. But the BLS also revised up previous months: non-farm employment grew 100,000 instead of 80,000 in October, and it advanced a whopping 210,000 in September, up from the previous estimate of 158,000. The fact that revisions lately have been positive is suggestive of an economy re-acclerating from its summer swoon.
Not surprisingly, government employment remains a drag: it fell 20,000, while private payrolls advanced 140,000. Within the private sector, manufacturing was flat and construction declined. Retail was up sharply, by 50,000, which suggests retailers are anticipating a robust holiday season.
The drop in the unemployment rate was welcome, but a bit deceptive. America’s employment report is based on two separate surveys: one of employer payrolls, which yielded the 120,000 gain; and a separate one of households, according to which employment rose 278,000. It’s the latter survey that’s used to determine the unemployment rate. The unemployment rate declined not just because of this strong employment growth but because the number of people looking for work declined: the labour force contracted and as a share of the working age population (the participation rate), it fell to a disturbingly low 64%. That we have not seen the unemployed flood back into the labour force in response to better economic data is troubling, but should not overshadow the overall picture of health.
Today’s report is no anomaly; it comes on the heels of a run of good data that suggests the American economy so far is defying the recessionary tug from Europe. The survey of purchasing managers point to an expanding factory sector, pending home sales are picking up, and anecdotal evidence points to a strong start to holiday shopping.
What’s behind this? I think the best explanation is that a decent recovery would have begun a year ago but for a run of bad luck: the Japanese earthquake and tsunami, the run up in oil prices following the Arab Spring, and the political brinkmanshp in America over the debt ceiling and in Europe over its sovereign-debt crisis.
Meanwhile, economists have pointed out that the labor force participation rate has been steadily shrinking over time due to structural changes in the economy. It’s not just the horrible job market that’s discouraging workers. The Congressional Budget Office, for instance, expectsthe participation rate to keep dropping in the years to come, even after the economy recovers. Why is that? Well, for one, the baby boomers will start retiring en masse soon. But the share of women who chose to work has also fallen to its lowest level in nearly 20 years. And, at the same time, the percentage of young people who are looking for work has dropped by quite a bit.
The CBO offers one explanation for why people under the age of 25 are dropping out of the labor force: “That change appears mostly to reflect a long-term increase in school enrollment (particularly among teens in the summer months) and a declining tendency for students to work while they are enrolled in school.” Some economists have argued that this trend could be a positive development if more young people are getting an education, although the fact that fewer students are working while at school might be one reason why student loan debt is becoming so unmanageable for many.
Meanwhile, Daniel Hartley, a staff economist at the Federal Reserve Bank of Cleveland, recently tried to dig in the numbers a bit further. He notes that the participation rate among older workers — ages 55 and up — has been holding steady since the recession began. That could be because seniors are healthier and feel like working longer, or it could be because their 401(k)s were torched in the financial crisis, forcing those workers to stave off retirement in order to replenish their savings. Hartley also points out that eligibility requirements for disability benefits have been loosened, and about 350,000 new workers were added to the rolls each year between 2007 and 2010. That explains a small fraction of the drop in the participation rate.
Employment was up 120,000 last month and the unemployment rate dropped significantly, to 8.6% in November down from 9% in October. Job growth in October and September was revised up by 72,000.
While the employment story has improved over the past few months, the decline in the November unemployment rate isn’t as good as it sounds. People who drop out of the labor force, like those who give up looking for work, are not counted in the jobless rate, and about half of the 0.4 percentage point decline was due to this factor. In fact, about 190,000 of the unemployed left the labor force last month.
Once again, the private sector added jobs—140,000 last month—and the public sector cut them (down 20,000).
The report is consistent with slightly better economic performance over the past few months. It’s always useful to average over a few months to work out some of the monthly noise in the data and over the past three months, employment is up by an average of about 140,000 per month, compared to 84,000 over the prior three months.
But there’s still a great deal of slack in the job market. Average weekly hours worked didn’t budget and hourly wages ticked down slightly—over the past year, hourly earnings, before inflation, are up 1.8%, well behind inflation.
In other words, we’re a long way away from providing job seekers and workers with the job and wage increases they need to get ahead. Outside of the public sector, we’re at least moving in the right direction, but very slowly.