The Bureau of Labor Statistics (BLS) released the Employment Situation report for November today and the big news is the decline in the unemployment rate from 9.0 percent in October to 8.6 percent in November. That would be great news if the decline came from people finding jobs, but more than half the decline came from people leaving the labor force. According to the household survey, in November 315 thousand people left the labor force while 278 thousand joined the ranks of the employed.
Meanwhile, the establishment survey showed an increase of 120 thousand in total nonfarm payrolls, and the sectors with the big gains were retail trade and temporary help services. The smaller increase in jobs from the establishment survey isn’t necessarily the problem. The establishment survey is considered more reliable than the household survey because of the much larger sample size, but the household survey includes the self-employed (the establishment survey does not), so both numbers can be “true.” The bigger points are that payroll employment (where most of the employment is) should be expanding more rapidly, the additions should be more broad based than retail trade and temporary help services (especially as we roll into the holiday season), and the labor force shouldn’t be contracting.
In a positive note, the September and October payroll figures were revised upward, adding 72 thousand jobs to the initial figures and bringing the average monthly gains to 132 thousand for the year.
But it’s not clear whether job growth is trending up or down over the year, and this pace is still well below the pace required to bring the unemployment rate down with a labor force that is expanding rather than contracting. The upshot is that today’s employment report is weaker than the decline in the unemployment rate would suggest.