Unemployment drops, jobs increase, but slowly
Employers added 146,000 jobs in November and the nation’s unemployment rate dipped to 7.7 percent, the government said Friday.
While job growth was higher than many economists expected, particularly in light of the destruction wrought by Hurricane Sandy, economists said the improvement was modest and incremental. At the current rate of jobs creation, it will take about a decade to return to pre-recession unemployment rates.
“The November data provide a clear reminder that mass joblessness remains the real and present economic danger this country faces,” Heidi Shierholz, an economist at the Economic Policy Institute in Washington D.C. said in a statement.“
The economy has been improving, albeit very slowly, and more than 12 million Americans remain out of work. The private sector has added jobs for 33 straight months and nearly every sector of the economy added jobs in November. November’s unemployment rate was the lowest level in nearly four years.
Labor Secretary Hilda L. Solis said retailers added 53,000 jobs in anticipation of increased holiday sales.
“There’s more work to be done,” Solis said in a statement, “ but our economic recovery remains on the right trajectory.”
Yet one reason the unemployment rate dropped is because about 350,000 workers gave up job searches and dropped out of the labor force. Only workers who actively seek work are counted by the Labor Department as unemployed.
Labor force participation has been dropping for the last decade. It tracks the number of working-age Americans who are holding a job or looking for one. The US participation rate was 66.4 percent in Nov. 2002; last month is was 63.6 percent.
Jim O’Sullivan, chief U.S. economist for High Frequency Economics in Valhalla, N.Y. cautioned against looking at one month of economic data because of its volatility. In the last three months employers, have added an average of 139,000 jobs, which he described as “modest” growth.
Some of the drop in the number of people looking for work may be due to retirements, particularly among baby boomers. But the drop in worker participation cannot be fully explained by retirements, he said.
“It’s kind of a strange report,” he said. “If anything, the numbers appear to be dropping more than can be explained by demographics.”
The number of workers entering or reentering the labor force was strong in September and October, he said, offsetting this months’s losses. He said a possible resolution to the political stand-off in Washington D.C. over tax increases and spending cuts -- the fiscal cliff -- could make employers less cautious about hiring and investing in the new year.
“That could give hiring a lift,” he said.
Simon Johnson, an economics professor at the Massachusetts Institute of Technology and former chief economist for the International Monetary Fund, said the jobs report was stronger than anticipated, particularly in light of the impact of Hurricane Sandy. The Federal Reserve is buying billions in mortgage backed securities every month to stimulate the economy and Fed policy makers meeting next week will decide whether to do more.
“Prior to today, I thought the Fed would be pretty aggressive next week,” Johnson said. “I think they’ll back off or slow down.”
It’s not clear when the central bank would start tightening fiscal policy and raising interest rates, but Johnson said he expects that to occur “sooner than is indicated.”Megan Woolhouse can be reached at email@example.com.