12.07.12 3:22 PM ET
Jobs Report: Jack Welch Was Right!
The jobs report actually came in quite good. Even in the aftermath of Hurricane Sandy, the economy managed to add 146,000 payroll jobs in November, and the unemployment rate fell to 7.7 percent. That’s been par for the course for the past two years—decent, but not enough to pick up much of the slack in the labor force. And it is rare to have one with unambiguous good news.
Let’s start with the main number: the number of jobs created. There was great fear that Hurricane Sandy would wreak havoc on the numbers, and on the labor market in highly populated East-Coast states like New Jersey and New York. But that, and the impending fiscal cliff and political uncertainty, didn’t seem to deter hiring. Compared with a year ago, there are 1.89 million more Americans with payroll jobs today. Since February 2010, the economy has created more than 4.6 million jobs.
The economy has shown an impressive and consistent ability to create jobs in a period of enormous uncertainly and recurring crises. Last month, the growth was driven by retail (52,000 jobs), health care (22,000 jobs), and professional services (18,000 jobs). The influence of Sandy could likely be seen in the fact that the construction sector lost 20,000 jobs in the month.
One more interesting item in the payroll data. For months we’ve been discussing the “conservative recovery.” Every month for the past couple of years, the private sector has been adding jobs, occasionally at an impressive rate. And nearly every month, the public sector—state, local, and federal government—has been cutting jobs. All in, over the past two years, the public sector has cut about one million jobs. The conservative recovery continued in November. But there are signs that the effects of austerity on employment may be coming to an end. In November, government cut just 1,000 positions, after having reduced employment by 51,000 in October.
Now for the bad news. The work week and wages barely budged. Over the past 12 months, average hourly earnings have risen by a meager 1.7 percent. That’s not really keeping up with inflation. More significantly, the apparently good news about the unemployment rate comes with a few caveats. The unemployment rate is calculated from the household survey, in which BLS calls up people and asks whether they have been working or not. It calculates the rate by dividing those who are working by those who say they are in the workforce. If people get discouraged, or drop out of the workforce, or stop looking, then the rate can fall even if the number of people who say they are working falls. And that’s what seems to have happened last month. The unemployment rate fell, from 7.8 percent to 7.7 percent. But that happened because the labor force fell by about 350,000, while the number of people saying they were working fell by about 122,000. That’s bad news. But the household survey data is notoriously volatile and bumpy.
One final note. Jack Welch was right. The September jobs report wasn’t as strong as it initially seemed. Each month, when it reports the numbers, BLS revises the data from the previous two months. So September’s number, originally reported as a gain of 114,000 and revised in November to a gain of 148,000, was revised downward to 132,000. The October figure, originally reported as a gain of 171,000, was revised down to a gain of 138,000. In other words, revisions found there were about 49,000 fewer jobs in the economy than previously thought.