Superficially, the November jobs report doesn’t look bad. Non-farm jubs increased by almost 150,000 and the unemployment rate dropped to a four year low of 7.7 percent.
Viewed with a little more sophistication, the report looks worse. 150,000 new jobs isn’t very impressive. And the drop in the unemployment rate stems from the large number of Americans who stopped looking for work.
In fact, the deeper one drills down, the grimmer the picture. James Pethokoukis has the details:
1. The two-tenths drop in the unemployment rate was because people gave up looking for work. The labor force participation rate fell to 63.6% from 63.8% in October. If it had just held steady since then, the unemployment rate would be back over 8%. Indeed, if the LFP rate was just where it was in November 2011, the unemployment rate would be 8.3%. Some 542,000 Americans left the labor force just last month.
2. If labor force participation was at its January 2009 level, the unemployment rate would be a whopping 10.7%. Now, some of the drop in the LFP is due to demographic reasons, primarily the aging of the US population. But even taking that into account would give you a much higher unemployment rate than 7.7%. If you go by the pre-recession CBO forecast of the 2012 LFP rate, the unemployment rate would be 10.4%.
3. In November, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $23.63. Over the past 12 months, average hourly earnings have risen by 1.7%. Unfortunately, inflation — as measured by the consumer price index — has risen by 2.2% over the past year, meaning average hourly earnings have fallen by 0.5% in real terms.
4. The number of long-term unemployed remains at a sky-high 40.1%, the same as in August.
5. Since the beginning of this year, employment growth has averaged 151,000 per month, about the same as the average monthly job gain of 153,000 in 2011. At that pace, the US would not return to pre-Great Recession employment levels until after 2025, according to the “jobs gap” calculator from The Hamilton Project.
6. Also note that the misleadingly low 7.7% unemployment rate is still 2.5 percentage points above the 5.2% rate that Team Obama predicted for November 2012 if Congress passed the $800 billion stimulus.
Is this the new normal? The answer depends in part, I should think, on the economic policies we adopt. Speaking of which, this doesn’t seem like a good time to raise anyone’s tax rate.