The unemployment rate fell by 0.4 percentage point to 9.4 percent in December, and nonfarm payroll employment increased by 103,000, the U.S. Bureau of Labor Statistics reported today. Employment rose in leisure and hospitality and in health care but was little changed inother major industries.
First, let's loook at why the unemployment rate dropped. This data is from the household survey, and is a simple fraction of the total number of unemployed over the total civilian labor force. The good news is the total number of unemployed fell from 15,041,000 to 14,485,000. In addition, the civilian labor force also decreased from 153,950,000 to 153,690,000 (remember, a decrease in denominator increases the resulting percentage). Assuming that some people will argue the decrease is all due to people leaving the labor force, consider this: the number of unemployed decreased by 556,000 while the civilian labor force decreased 260,000. Even if the drop in the labor force is due to people giving up looking, there is still a drop of 296,000 in the total unemployed that is not due to people giving up. In addition, the total number of employed in the household survey increased from 138,909,000 to 139,206,000 (+297,000 which is in line with the ADP report) So, overall, the household report is actually pretty good.
In the establishment survey all the gains same in the service sector, as goods producing industries lost 2,000 jobs. Services added 115,000 jobs, with the bulk of the gains coming in education and health care (+44,000) and leisure/hospitality (+47,000). Average weekly hours were steady, but average hourly earnings increased by 3 cents, which led to an increase in average weekly earnings.
Finally, we have the following revisions:
The change in total nonfarm payroll employment for October was revised from +172,000 to +210,000, and the change for November was revised from +39,000 to +71,000.
In other words, an upward revision to this report is a strong possibility.
Overall, I'd give this report a 5.5 on a 1-10 scale.
5 comments:
I'd give this report about a 6.5 in and of itself, pending revision. I think it's likely that we will see this revised updward to be at or near the 150K we need to start really bringing down unemployment. Let's hope so.
Correct me if I'm wrong, but haven't we seen 30-40000 jobs added in each cycle of revisions for the payroll survey for every month since the summer? So when the final December number comes out in March, we might well expect somewhere around 175000-- right in line with expectations
Pretty wild how the ADP number and household number matched exactly. Let me play devils advocate for this month even if I don't believe the following scenario to be completely likely. If the 9.4% number holds, job growth in 2011 averages 220k, and labor participation rises at a gradual enough pace it would be possible that unemployment is at 8.4% by the end of the year. That number is not too far off from your own year-end expectation bonddad.
Economists, pundits, analysts and policymakers probably are not considering that the first wave of babyboomers have hit retirement age. Last year, many older laid off workers probably took early retirement when their unemployment benefits ran out. That is why the U6 rate probably fell even though job growth was below 150,000, the consensus figure believe needed for job growth to keep pace with population growth. My guess is that by the end of the decade we will experience worker shortages. Another factor is the weak economy and anti-immigrant sentiment in this country has slowed immigration down.
In the short run, job growth for October and November were revised upwards. Thus, there is a good chance that this report underestimates December job growth. Moreover, at this time of the year, there are seasonality problems with the data.
The economy looks to be headed in the right direction. My biggest concern is that higher oil prices will cut this recovery short. House Republicans may also destroy this economy by forcing the government to default on its debt obligations and passing an extremely austere budget.
Read in the news today -- Bernanke seems to think unemployment will likely stay elevated for up to five more years.
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