NPI's Cascadia Advocate

Offering commentary and analysis from Washington, Oregon, and Idaho, The Cascadia Advocate is the Northwest Progressive Institute's unconventional perspective on world, national, and local politics.

Friday, December 2nd, 2011

Unemployment falls to lowest level in two and a half years, Department of Labor says

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.

POSTSCRIPT: Dean Bak­er has more analy­sis at CEPR’s site. And Robert Reich has some thoughts that are worth read­ing as well.

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