Friday, December 7, 2012

WHEW! The November jobs report doesn't stink

- by New Deal democrat

Considering we were all bracing for the impact from Sandy - and I'm sure there was some hidden in the statistics - November was actually another pretty good report, with a few dark clouds interspersed with the unexpected sun.

As you probably already know, the headline is 146,000 jobs added, and the unemployment rate fell to a new post-recession low of 7.7%.

Let me get right to the leading indicator aspects of the report:
- the manufacturing workweek increased .1 to 40.6 hours. This will be reflected in the LEI.
- temporary jobs increased 18,000. So long as these are increasing, it is quite unlikely that the economy is contracting.
- unemployment of less than 5 weeks decreased by -55,000. This is only about 160,000 above the post-recession low. This is a slightly more leading indicator than the weekly jobless claims, and also indicates no recession.
- aggregate hours worked increased 0.2%. This is a coincident incidator that is thought to be taken into account by the NBER in determining if a recession has begun or ended.

The only downside among leading aspects of the report was that manufacturing shed 7000 jobs, yet another among a slew of indicators suggesting that manufacturing is probably contracting slightly.

Downside coincident data included downward revisions to both September (-16,000) and October (-33,000). It should be noted that September is still 18,000 higher than originally reported.

Also, the more volatile household employment number declined -122,000 from October. (UPDATE: Those who reported they were not working due to weather was about 300,000 higher than normal. Presumably that is Sandy. Without this jump, the household number would have been about +178,000). Those not in the labor force rose by 542,000. Keep in mind that at least some of this is the ongoing wave of Boomer retirements. Thus the labor force participation rate declined, as did the employment to population ratio (to 58.7%), although it is still 0.4% higher than during the spring of this year.

Construction lost -20,000 jobs. Government shed 1,000 jobs. Overtime was steady at 3.2 hours.

Other good news included a further decline in the broad U-6 unemployment rate, which included discouraged workers, to 14.4%, another post-recession low.

Average hourly earnings increased $0.04 to $23.63. Year over year these have increased 1.6%, which is still less than the inflation rate.

Bottom line: The headline numbers were good (but of course still not good enough for a return to full employment anytime this decade), the leading indicator part of the report was mainly good, while the coincident internals in the report were weak. Considering how bad this report could have been including Sandy, I'm encouraged.