Why the drop in official unemployment rate to 8.6% in November isn't as good as it seems

12/02/2011 1:19 pm EST


Jim Jubak

Founder and Editor, JubakPicks.com

Good enough news on jobs this morning not to send stocks tumbling. But not good enough to be a reason for stocks to move up from here. It looks like that still depends on good news from Europe.

U.S. payroll numbers climbed in November to a net gain of 120,000. That was just about equal to the 123,000 expected by economists surveyed by Briefing.com.

The official unemployment rate showed a huge drop to 8.6% from 9%, but I think we can basically ignore that number since it was a result of a big 300,000 drop in the labor force and an increase in seasonal (that is, temporary) jobs for the holiday season. To be counted in the official unemployment number you have to have looked for work in the last four weeks. (Too discouraged to look? Well, then you’re not unemployed. In a related number the percentage of the official unemployed who have been unemployed for 27 weeks or longer climbed to 43% of all unemployed from 42.4%.) To be counted you also have to be available for work, so if you have a temporary job that will end in January, you no longer count as unemployed. (The Bureau of Labor Statistics does try to adjust its numbers to account for seasonal hiring trends but seasonal adjustment is always tough and it has been especially inaccurate during this agonizingly slow economic recovery when a lot of past patterns have been violated.)

The full unemployment rate, which counts discouraged workers and workers who with part-time jobs but who would like full-time work, dropped to 15.6% in November from 16.2%. Even that number counts people with temporary jobs as employed.

The most disappointing part of today’s numbers for me, however, came in the income section of the statistics. Average hourly wages fell by 0.1% in November after a gain of 0.2% in October. Average weekly hours worked stayed constant at 34.3. That adds up to less income in November than in October—and that’s not a good sign if you hope that the gains we’ve seen in holiday retail sales might stretch into January. Consumers can only spend what they don’t have by going into debt—and that’s not sustainable. The decline in hourly wages was enough to completely offset the gains in jobs so that for the United States as a whole wage income was flat in November.

It’s this weakness in income growth that makes me doubt that the strength shown by the U.S. economy over the last two quarters will continue into 2012 as the global economy continues to slow in the aftermath of the euro debt crisis.


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