A Good, But Not Great, Jobs Report For November
The November Jobs Report was good, but there still aren't signs of the kind of stronger economic growth we need to see.
The November Jobs Report followed up the report that was released last month for October with another showing of a relatively strong jobs market, and a seeming guarantee that the Federal Reserve will raise rates later this month:
Total nonfarm payroll employment increased by 211,000 in November, and the unemployment rate was unchanged at 5.0 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in construction, professional and technical services, and health care. Mining and information lost jobs.
In November, the unemployment rate held at 5.0 percent, and the number of unemployed persons, at 7.9 million, was essentially unchanged. Over the past 12 months, the unemployment rate and the number of unemployed persons are down by 0.8 percentage point and 1.1 million, respectively. (See table A-1.)
Total nonfarm payroll employment rose by 211,000 in November, about in line with the average monthly gain of 237,000 over the prior 12 months. In November, job growth occurred in construction, professional and technical services, and health care. Employment in mining and information declined over the month. (See table B-1.)
Employment in construction rose by 46,000 in November, with much of the increase occurring in residential specialty trade contractors (+26,000). Over the past year, construction employment has grown by 259,000.
In November, professional and technical services added 28,000 jobs. Job gains occurred in accounting and bookkeeping services (+11,000), and employment in computer systems design and related services continued to trend up (+5,000). Over the year, professional and technical services has added 298,000 jobs.
Health care employment increased by 24,000 over the month, following a large gain in October (+51,000). In November, hospitals added 13,000 jobs. Health care employment has grown by 470,000 over the year.
Employment in food services and drinking places continued to trend up in November (+32,000) and has risen by 374,000 over the year.
Retail trade employment continued to trend up in November (+31,000) and has increased by 284,000 over the year. In November, job gains occurred in general merchandise stores (+12,000) and motor vehicle and parts dealers (+9,000). Over the past 12 months, these industries have added 85,000 jobs and 71,000 jobs, respectively.
Employment in mining continued to decline in November (-11,000), with losses concentrated in support activities for mining (-7,000). Since a recent peak in December 2014, employment in mining has declined by 123,000.
Information lost 12,000 jobs over the month. Within the industry, employment in motion pictures and sound recording decreased by 13,000 in November but has shown little net change over the year.
Employment in other major industries, including manufacturing, wholesale trade, transportation and warehousing, financial activities, and government, changed little over the month.
Looking at other statistics measured by the report, the average workweek ticked downward slightly, but average hourly wages ticked slightly upward. This is consistent with the general trend for the past year or so which has seen both measures stay within relatively narrow boundaries that seem to indicate that employers may bee looking more at hiring new employees than increasing the hours worked by existing employees. Long term unemployment and the broader U-6 measure of unemployment continue to drop while Labor Force Participation remains at 62.5%, still near historical lows but perhaps indicative of a ‘new normal’ as the economy absorbs the impact of the slowly retiring Baby Boom Generation, suggesting that much of the slack from the Great Recession is being picked up to some degree. Finally, the jobs numbers for October and November were revised upward by a total of 35,000 new jobs, meaning that the economy has created an average of 218,000 over the past three months.
As The New York Times notes, these numbers, while hardly indicative of a boom, are strong enough that it likely guarantees that the Federal Reserve will raise interest rates later this months:
The American economy created 211,000 jobs in November, the government reported Friday, a robust showing that all but guarantees policy makers at the Federal Reserve will raise interest rates for the first time in nearly a decade when they meet this month.
The unemployment rate held steady at 5 percent, unchanged from October.
The big gain in hiring reported for October was revised upward by 18,000, while September’s weaker payroll performance was revised upward by 8,000.
The overall picture of labor market strength evident in the November report removes the last major obstacle ahead of the Fed decision.
“Short of geopolitical events that are larger than anything we’ve seen lately, this is a done deal,” said Diane Swonk, chief economist at Mesirow Financial in Chicago.
Before the report for November, economists had been looking for payrolls to rise by 200,000, with no change in the unemployment rate.
This week, the chairwoman of the Federal Reserve, Janet L. Yellen, and other top Fed officials hinted that a rate increase was imminent.
Raising rates, Ms. Yellen said in a speech Wednesday, would be “a testament, also, to how far our economy has come in recovering from the effects of the financial crisis and the Great Recession.”
“It is a day that I expect we all are looking forward to,” she added.
Besides the tempo of hiring and the unemployment rate, Ms. Yellen and fellow Fed policy makers have been paying close attention to the pace of wage increases, or until very recently, the lack thereof.
At the same time, the Times’ Neil Irwin notes that while this report and other statistics do constitute good news, there’s still not a sign of growth out there:
The thing about the new jobs numbers is that, solid though they may be, they are solid in exactly the same way that most jobs numbers have been solid for the last couple of years. They don’t show the kind of progress on some key weaknesses in the economy that the Fed might like to see if it’s going to move faster, rather than slower, in the path of rate rises.
Consider one of the great weaknesses of the economy the last few years: the millions of people who left the labor force entirely during the last recession and have not returned, many of them of prime working age. The new numbers don’t offer much sense of progress. The percentage of the population working was unchanged at 59.3, which is only a tenth of a percentage point higher than it was a year earlier.
And average hourly earnings rose 0.2 percent, which was what forecasters expected but also doesn’t suggest that wage inflation is starting to break out. That number is up 2.3 percent over the last year, which is hardly the stuff that would fuel fears of excessive inflation.
The economy has withstood the threat that China and other emerging markets would drag down the global economy, a fear that enveloped financial markets over the summer. The unemployment rate is low. At the Fed, those arguing that it’s time to wean the economy from its reliance on zero rates are likely to win the day.
But in terms of the day-to-day experience of American workers and potential workers, the new numbers point to how much repair there is left to take place.
That day-to-day experience, and the feeling that the seems to be prevalent on many levels of American society that the economy really isn’t as good as the statistics are claim is likely to be a big issue in the 2016 elections. Already, we have seen signs of it in the success that Vermont Senator Bernie Sanders has had in attracting crowds, and poll support, since launching his campaign at the start of the summer. We’ve also seen in the rhetoric of Hillary Clinton, who began to adopt the emphasis, if not the exact theme and proposals, of the Sanders campaign when her poll numbers began to slip over the summer. On the other side of the aisle, you hear similar arguments from Republicans who argue that in favor of policies that they say are aimed at increasing economic growth and employment and expanding economic opportunity for all Americans. Whatever one might think of the merits of the policy proposals that each of these candidates are making, it’s obvious that the candidates themselves are responding to the concerns of voters and the perception that the economic situation of the average American has not improved since the Great Recession as much as the numbers, and the gains on Wall Street, would make it seem. You can see this reflected in the bellwether Right Track/Wrong Track poll, which continues to show that Americans believe that the country is on the wrong track. Since elections are often largely driven by how voters feel about the state of the economy and the country, these perceptions could well end up deciding the election in the end regardless of what the economic statistics say.
So, yes, this is a good jobs report and we’ll hopefully see more numbers like this going forward. As Irwin says about, though, to some extent this is just a ‘marking time’ report that, while it sows the economy slowly moving forward doesn’t show much sign of the kind of growth we really want to see. If that continues, it could have some interesting political implications.