Our View: November jobs report
Posted: December 8, 2012
The headline adorning the CNN Money story — “Unemployment rate falls to lowest level since 2008” — screamed optimism. False optimism, as it turned out. The devil, as always, lurks in the details, as well as in the numerical high weeds.
OK, the jobless rate did fall — from 7.9 percent in October to 7.7 last month. That’s good, at least at first blush. But the all-too-critical, and far-too-overlooked, labor force participation rate also fell two ticks, from 63.8 percent to 63.6 percent. That’s not so good.
What all does this tell us? Principally, that more and more people decided to stop looking for work, which accounts for the reduction in the jobless rate. The Labor Department counts as unemployed only those who actively pursued employment in the last four weeks. It does not count those who stopped searching.
Hence, the labor force participation rate is a more accurate barometer of how the nation is faring from an employment standpoint. In a growth, or recovering, economy, that rate would be rising.
Nonetheless, some observers are doing their utmost to spin the November report positively, noting in particular that more jobs — 146,000 new positions for the month — were added than expected. Some economists had pegged job growth at fewer than 100,000 new positions in the belief that distortions prompted by Superstorm Sandy would skew requisite data collection downward. Those distortions never materialized.
Still, 146,000 new jobs do not necessarily suggest an economy on the uptick, especially when it is noted that 1) manufacturing shed 7,000 jobs (expected, due to the Hostess bankruptcy) and construction lost 20,000 (unexpected, given the supposed housing recovery), 2) a third of the gains (52,000) came in the retail sector as a result of holiday hiring, and 3) the September and October reports were revised downward, to the tune of 49,000 total jobs.
Thus, what transpired in November is hardly anything to cheer about. And particularly so when you consider, as James Pethokoukis of the American Enterprise Institute did Friday, that this report may be indicative of the so-called “new normal.”
Mr. Pethokoukis used the word “nasty” to describe this state of affairs. Overstated as it may sound, this assessment may, in time, prove spot-on.