Jobs Report Not as Rosy as It May Appear

Nonfarm jobs were +120,000 for November with upward revisions of +72,000 total for September and October. Private service producing was +146,000, goods producing was -6,000, public sector was -20,000. Unemployment rate dropped to 8.6%. This is because 315,000 dropped out of the labor force. Since they are no longer looking for jobs this decreased the unemployment rate. We will see more of this decreasing labor force and decreasing unemployment rate as people’s 99 weeks of unemployment benefits expire. This March 2011 article by economist Alan Kueuger forecasts precisely what is happening. Alan is Obama’s choice to head the Council of Economic Advisors.

We should pay attention to the labor participation rate not the unemployment rate because labor participation drives the economy. The labor participation rate (Civilian Labor Force/Civilian Noninstitutional Adult Population on this table) has dropped 0.5% in the past year.

Last month 120,000 found work and 315,000 gave up looking for a job. If you think that is good, feel free to celebrate but do not invite me to the party.

Average Hourly Earnings were down -0.1% and the Average Work Week was flat at 34.3 hours.