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Topline Unemployment Rate Drops to 8.6%, But Headwinds for Jobs Remain

The Bureau of Labor Statistics reports that the economy added 120,000 jobs in November, which was about in line with expectations, perhaps even a little less. But this was enough to send the topline unemployment rate tumbling to 8.6%.

This can be attributed to a healthy number of people dropping out of the labor force (close to 300,000) compared to last month’s survey. I remember a lot of noise around the topline unemployment rate last year around this time, when it fell by a full point within 2-3 months without much of a surge in hiring. The employment-population ratio, another indicator of hiring, went up only 0.1% from October, to 58.5%. This is in the right direction, but it’s not indicative of a major shift like you’re seeing in the topline unemployment rate. So I’d be cautious putting a lot of stock in that topline rate. The measured workforce declined, but those people still exist and are without work.

120,000 is actually less than expected, as I said, especially because the ADP survey from earlier in the week showed a 206,000-job gain in private payrolls. However, September and October were revised upward, with now +210,000 in September and +100,000 in October.

We obviously still have major problems in the jobs market. Of those still in the labor force, 5.7 million Americans have been unemployed over 27 weeks. That’s 43% of the total counted as unemployed by the BLS. The private sector continued to outpace the public sector, with private payrolls gaining by 140,000, and public sector jobs falling 20,000. We still have this state and federal budget crisis that is leading to a gradual hemorrhaging of jobs. Many of the cuts in public sector jobs this time came from a loss of 5,000 jobs in the US Postal Service.

Retail was the big gainer in November (50,000 jobs), which I guess is to be expected in the pre-holiday season. Food and drink services added another 33,000 jobs. Health care added 17,000 jobs. Manufacturing employment and construction employment were flat.

The average workweek was unchanged and the average hourly wage fell by 2 cents. So there’s this weird situation where the employment report is simultaneously disappointing on several levels, and encouraging with the topline drop. But that topline drop isn’t a very stable number.

David Dayen

David Dayen