Friday, December 2, 2011

Unemployment at 8.6%; Jobs Up 120,000

From the BLS:

The unemployment rate fell by 0.4 percentage point to 8.6 percent in November, andnonfarm payroll employment rose by 120,000, the U.S. Bureau of Labor Statisticsreported today. Employment continued to trend up in retail trade, leisure andhospitality, professional and business services, and health care. Governmentemployment continued to trend down.
So far, so good. Now let's look at the details:

In November, the unemployment rate declined by 0.4 percentage point to 8.6 percent.From April through October, the rate held in a narrow range from 9.0 to 9.2 percent.The number of unemployed persons, at 13.3 million, was down by 594,000 in November.The labor force, which is the sum of the unemployed and employed, was down by alittle more than half that amount.
This takes a bit of an explanation. The unemployment rate is derived from the household survey, which gives us several important employment numbers. First, we get the civilian labor force, which comprises the denominator of the unemployment fraction (The civilian labor force is the total number of employed and unemployed people in the country). This amount decreased by 315,000. In addition, the number of employed in the household survey increased by 278,000 while the number of unemployed decreased by 594,000. Finally, the "not in the labor force" number increased by 487,000 (also remember that this number is horribly misunderstood and misrepresented. The increase could have just as easily been caused by an increase in the number of people retiring as from people giving up looking).

So putting this all together, we get the following:

More people are working (+278,000)
Fewer people are unemployed (-594,000) -- this number was a little more than twice the number of people employed.
The denominator of the equation decreased.

Overall, not bad. Some of the decrease was actually do to people not being unemployed.

Expect more discussion about the labor force participation rate from this report -- which decreased to 64%. I've discussed this before, but it bears repeating; we're now in an age when baby boomers are retiring -- meaning this number will probably be lower for the foreseeable future (in fact, I would argue the shape of the labor force has fundamentally changed because of this).

Let's move onto the establishment data:

Employment in retail trade rose by 50,000 in November, with much of the increaseoccurring in clothing and clothing accessories stores (+27,000) and in electronicsand appliance stores (+5,000). Since reaching an employment trough in December 2009,retailers have added an average of 14,000 jobs per month.

Employment in leisure and hospitality continued to trend up in November (+22,000).Within the industry, food services and drinking places added 33,000 jobs. This gainmore than offset a loss of 12,000 jobs in the accommodation industry. In the last12 months, leisure and hospitality added 253,000 jobs, largely driven by employmentincreases in food services and drinking places.

Employment in professional and business services continued to trend up in November(+33,000). Modest job gains continued in temporary help services.Health care employment continued to rise in November (+17,000). Within the industry,hospitals added 9,000 jobs. Over the past 12 months, health care has added an averageof 27,000 jobs per month.

Manufacturing employment changed little over the month and has remained essentiallyunchanged since July. In November, fabricated metal products added 8,000 jobs, whileelectronic instruments lost 2,000 jobs.

Construction employment showed little movement in November. Employment in theindustry has shown little change, on net, since early 2010.

Government employment continued to trend down in November, with a decline in the U.S.Postal Service (-5,000). Employment in both state government and local government hasbeen trending down since the second half of 2008.
We see an overall improvement across the board in the establishment survey, with the exception of government employment.

On a scale of 1-10, I'd give this a 5.5.


NDD here with a few additional comments:

The best news is the continuing upward revisions of past reports. September and October were revised up a total of 72,000. For the last three months, the average gain was 143,000.

The more volatile household survey employment measure showed a gain of 278,000 in November on top of a gain of 277,000 in October. Since the household survey tends to lead at inflection points, these are very good numbers.

While the decline in the labor force will be trumpeted by bearish sites, this is responsible for only half of the .4 decline in the unemployment rate.

There were negatives, though. (1) Average hourly earnings actually decreased $.02. This is another reinforcing shot of real wage deflation. (2) The manufacturing workweek declined 2/10's of an hour. This is one of the 10 LEI, and is a significant negative although it just took back last month's gain. Over a longer period, this series is now trending sideways. (3) Only 2000 manufacturing jobs were added. This leading series is also trending sideways. (4) There was a slight decline in aggregate hours worked, although the longer trend remains strongly higher.

My bottom line is that the economy is once again showing strength - but this will once again trigger the Oil choke collar.