The Bureau of Labor Statistics today released a report summarizing the state of the economy for the just ended month of November. Turns out our nation’s unemployment rate has gone down. Here’s Bloomberg with more details:
Job gains in the U.S. picked up last month and the unemployment rate unexpectedly fell to the lowest level since March 2009, a decline augmented by the departure of Americans from the labor force.
Payrolls climbed 120,000, after a revised 100,000 increase in October, with more than half the hiring coming from retailers and temporary help agencies, Labor Department figures showed today in Washington. The median estimate in a Bloomberg News survey called for a 125,000 gain. The jobless rate declined to 8.6 percent from 9 percent.
At a media event in the District of Columbia with his predecessor Bill Clinton, President Barack Obama cheered the report.
“This morning we learned that our economy added another 140,000 private sector jobs in November,” the President said. “The unemployment rate went down. And despite some strong headwinds this year, the American economy has now created in the private sector jobs for the past twenty-one months in a row; that’s nearly three million new jobs in all, and more than half a million over the last four months.”
“The policies this administration has pursued are adding jobs back into the economy, and our recovery is picking up steam,” added Obama’s Secretary of Labor, Hilda Solis. “In November, American companies increased hiring across virtually all regions and all sectors to keep pace with growing consumer consumption and demand. Last week we saw people talk with their wallets.”
“One week after soaring Black Friday spending, we are seeing job growth firmly in the black heading into the holidays.”
On the surface, it would seem that the President and his team are correct that this is very good news we should all be heartened by. But a closer look at the report suggests the employment situation may not be as rosy as it seems.
Respected University of Oregon economist Mark Thoma, who writes the widely read (and Pacific NW Portal syndicated) blog Economist’s View, has published a more comprehensive reaction to the report.
Here’s an excerpt from his analysis, which we recommend reading in full:
First, note that depending upon which estimates you look at, it takes from 90,000–125,000 jobs just to keep up with the growth in the population. Thus, the 120,000 jobs that were created in November is enough to keep the unemployment rate from going up, but it is not enough by itself to absorb all the new workers entering the labor force and at the same time reduce the fraction of people that are currently unemployed. So the fall in the unemployment rate cannot be attributed to robust job growth.
Second, the report shows a decline in the labor force of 315,000 for November, and about half of the decline is attributed to discouraged workers giving up the search for a job. This exit of workers rather than job creation is the main source of the fall in the unemployment rate, and since so much of it is from discouraged workers this is not an encouraging development. Note, however, that there is a lot of month to month variability in the labor force participation numbers, and some of this may simply be month to month noise in the measurement.
These are both important points, particularly the second one. Many (if not most) Americans are unaware that people who would like a job — but have given up on the job search for the time being — are not counted in the unemployment rate. (These are the discouraged workers Thoma is referring to.)
Also not counted are underemployed workers: those who would like to find full-time jobs but can’t, so they are stuck working part-time jobs.
So it’s probable that the unemployment rate is understating the true level of unemployment. Now, that said, there are some positive trends in the Bureau of Labor Statistics’ report — for instance, the number of people working in construction increased, and employment in the manufacturing sector held steady. We can certainly be happy about that. But we’re hardly out of the woods yet, as one analyst stressed to Bloomberg Businessweek.
“It’s good news, not great news,” said Nariman Behravesh, chief economist at IHS Inc. in Lexington, Massachusetts, whose forecast matched the survey median. “The labor market is gradually healing.”
That seems like a pretty accurate assessment of where we’re at.
Let’s hope that during this holiday season, doors begin to open up for as many of those discouraged workers as possible, so they can rejoin the labor force and help bolster America’s economic security.