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.
