November Jobs Report Wasn’t So Great After All by Gary D. Halbert
FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
December 9, 2014
IN THIS ISSUE:
- November Unemployment Report Was a Surprise
- November Jobs Report Was Not All Good News
- America Still a Long Way From Full Employment
- Conclusions on the November Jobs Report
- Could Relief For Businesses be on the Way Next Year?
- President Obama Considering Sanctions Against Israel?
November Unemployment Report Was a Surprise
Last Friday’s unemployment report for November was a stunner, at least on the surface. US businesses ramped-up hiring across the board in November, putting 2014 on pace to be the best year for job growth since 1999.
Non-farm employers added a seasonally-adjusted 321,000 jobs in November, the most in one month since January 2012, according to the Bureau of Labor Statistics (BLS). That number was substantially higher than the pre-report consensus of just 230,000.
Only 7,000 of the 321,000 new jobs came from government. Nearly all parts of the private sector contributed, including 28,000 new jobs in manufacturing. With total upward job revisions of 44,000 for September and October, the economy has added 2.65 million jobs in the last 12 months.
Also encouraging is that wages rose at a faster clip in November, with average hourly earnings rising nine cents to $24.66. Wage increases year-over-year were 2.1%, which remains historically low, but the November gains are a glimmer that rising job prospects are beginning to flow to workers via bigger paychecks.
Those paychecks and prospects lured another 119,000 Americans back into the workforce in November, which is the main reason the unemployment rate held at 5.8% despite the healthy jobs gains. The labor participation rate didn’t budge from a sickly 62.8%, but if job creation continues at this pace more people will likely return to work.
One hopeful sign: Those saying they were working part-time but wanted full-time employment fell by 177,000. About 6.9 million Americans are working part-time because they cannot find full-time positions. The broadest measure of unemployment, which includes these workers, dropped to 11.3%, down 0.1% from October. Those out of work for 27 weeks or more fell by 101,000. A rising tide lifts even the long-term unemployed.
The best news would be that this jobs trend signals renewed confidence by employers in the prospects for economic growth. The last two quarters were robust at 4.6% and 3.9%, respectively, in annual GDP and would represent the strongest growth since the mid-2000s, if the pace continues. The declines in oil prices, and thus gasoline, are giving consumers a boost in spending power that will further encourage business investment and hiring.
President Obama said on Friday that the United States has added more jobs over the last four years than Europe, Japan, and all other advanced countries combined (I have no idea if that is true). Other US officials noted that job growth in November was driven by better paying blue-collar and higher-skill sectors, a contrast to the low-wage boom earlier in the recovery.
November Jobs Report Was Not All Good News
As is the case with most government reports, last week’s turbocharged jobs headline came in-part thanks to “seasonal adjustments” and other wizardry at the Bureau of Labor Statistics, which reported that US job growth hit 321,000 in November.
Those numbers – from the “establishment survey” (employer payroll numbers) which counts the number of jobs – sound nice on the surface, and they certainly present reasons for confidence that the job market continues to mend. However, the “household survey,” which is a head-count of those actually working, shows a very different picture.
According to the household survey, that big headline number of 321,000 new jobs translated into only 4,000 more Americans working in November than in October. For example, a person working two or three jobs is only counted once in the household survey – versus two or three times in the establishment survey. Yet that difference in counting can’t account for the big discrepancy between the two surveys in November, and suggests some major revisions to one or both surveys in January.
In November, 119,000 new people entered the labor force, according to the BLS, but another 115,000 filed for first-time unemployment benefits – again, a net of only 4,000 more Americans working. As a result of this relatively small number of net new workers, the unemployment rate remained at 5.8%. And the labor force participation rate remained at 62.8%, which is just off the year’s worst level and around a 36-year low.
And there’s more: Full-time jobs declined by 150,000, while lower-paying part-time positions increased by 77,000 – that’s not good. There were 110,000 fewer married men at work, while married women saw their ranks shrink by 59,000.
As for the nine cent per hour wage increase, supervisors and managers got most of the pay raises and the benefit of extra hours worked in November. For production and non-supervisory workers who make up the vast majority of the work force, average hourly pay rose by only four cents, to $20.74, and the average workweek was unchanged, at 33.8 hours.
Even that overstates the day-to-day reality and prospects for many workers. Fully a quarter of the jobs created in November were in retail and in leisure and hospitality, fields that in general do not offer enough pay or hours to make a decent living.
Finally, let’s not forget that 9.1 million remain unemployed, which is 1.9 million more than there were in November 2007 before the financial crisis and the Great Recession began.
America Still a Long Way From Full Employment
Philadelphia Fed President Charles Plosser proclaimed on Wednesday of last week that “the economy is near full employment.” While that’s what you might expect a hawkish central banker who’s anxious to raise the Fed Funds rate to say, he is simply wrong. With the unemployment rate at 5.8%, the economy is still a good way from full employment.
No matter your economic perspective, there is no arguing that this recovery from the crisis of 2008 has been extremely lame, at best. Historically, full employment in the US rests somewhere below a 5% unemployment rate and coincides with an increase in the labor-force participation rate, along with a healthy, meaningful increase in wages.
As illustrated at left, the labor force participation rate is trending down and remains near a 36-year low. The last time the economy was at full employment was in 2000 when unemployment averaged 4% for the year.
While President Obama touts this economic “recovery,” there are still over 3 million Americans mired in the long-term unemployed camp. And many of those who were hired are in temporary or part-time slots, or full-time positions that pay less than their previous salaries.
These are the people who have either taken part-time work because they can’t find a full-time job, have been jobless for 27 weeks or more, or are considered “marginally attached to the labor force,” meaning they have looked for work in the past 12 months, but not in the most recent four weeks.
This does not include the 770,000 “discouraged workers.” These are the folks who have stopped looking altogether because they believe that no jobs are available for them – a true