A Bang-Up Jobs Report


Can we get a meep-meep? The economy added 321,000 jobs in November, topping off “the best three-month period of labor market expansion since the financial crisis”:

The unemployment rate kept steady at 5.8 percent, its lowest mark since July 2008, according to the report from the U.S. Department of Labor. Some economists said that November’s data — across-the-board job creation, coupled with a slight uptick in wages — has put the American economy in its best position in years. The country has also been buoyed by plummeting global oil prices, which translate to a de facto raise for American consumers, who are now spending far less at the pump. …

So far this year, the United States has added some 2.65 million jobs — an average of about 241,000 a month. November marked the best single month for job growth since January 2012 and well exceeded the projection of economists surveyed by Bloomberg, who predicted that the economy had added about 223,000 jobs for the month. For 10 straight months now, the economy has added at least 200,000 jobs. That hasn’t happened since 1994.

September and October’s numbers were revised upward, adding another 44,000 jobs. Wages also ticked up a bit, but Ben Casselman cautions against getting too excited about that:

Average weekly earnings rose 2.4 percent from a year earlier, their fastest pace in a year. Note that’s weekly earnings. Hourly earnings are up a more modest 2.1 percent, only a bit faster than the rate of inflation. The growth in weekly earnings was driven by companies asking their employees to work more hours — a good sign for the economy but not evidence that employers are being forced to offer raises to hold on to workers. In any case, one month of solid wage growth isn’t enough to declare victory.

But let’s call a spade a spade: This month’s jobs report crushed it.

Robert Stein digs into some other encouraging details:

First, the median number of weeks of unemployment fell to 12.8, the lowest so far in the recovery. Second, the share of quitters among the unemployed increased to 9.1 percent. This indicator is important as Fed Chair Yellen has used it in the past as a sign of worker confidence. Third, and perhaps most important, was a 0.4 percent increase in average hourly wages, the largest gain in 17 months. Some analysts have been saying the Fed needs to see faster wage growth before it starts raising short-term rates. Well, there they go.

Combined with a 0.6 percent increase in total hours, total cash earnings were up 1 percent in November, the most for any month since 2006, and are up 4.8 percent versus a year ago. These gains are much faster than the roughly 1.5 percent increase in consumer prices and show growing consumer purchasing power.

But Neil Irwin curbs his enthusiasm:

The usual caveats have to come into play here. It’s one month. It will be revised multiple times. There is a wide error band around these numbers, and all this may turn out to be an aberration. Average hourly earnings are still up only 2.1 percent over a year earlier, just barely faster than inflation. And, lest we get too cheery, it’s worth at least pointing out a weaker spot in the report. The survey of households on which the unemployment rate is based painted a more stagnant picture of the economic situation, with the proportion of the population in the labor force and the proportion of the population with a job both unchanged.

And Matt O’Brien worries that numbers like these will inspire the Fed to raise interest rates, slowing down the jobs recovery:

The question now is whether this kind of job growth, if it continues, will get the Federal Reserve to start raising interest rates before they’re expected to next June. And the answer, unfortunately, is: maybe? Labor slack, after all, is declining pretty fast. Part-time workers who want full-time jobs fell by 177,000 last month. And so did long-term unemployment by another 101,000. Add in the possibility of people getting raises, which, again, is still in the nascent stage at best, and it’s clear that the economy is picking up speed.

But, as I said, it’d still be unfortunate to raise rates too soon, because there’s still a pretty deep hole to dig out of. It’s just that the hole we were in before was so cavernous that this seems normal-ish now. Remember, 2.1 percent wage inflation, which everyone is trumpeting as a sign of a real recovery, is still nothing.

(Chart via Danielle Kurtzleben)

A Status Quo Jobs Report

Jobs By Month

Suzy Khimm summarizes today’s numbers:

The U.S. economy added 209,000 jobs in July, and the unemployment rate rose slightly to 6.2%. It was the sixth straight month that the economy added more than 200,000 jobs, suggesting that the labor market is recovering steadily, though the report was slightly below economists’ predictions of 230,000 new jobs in July.

The last time the economy added 200,000 jobs every month for six months was 1997. Nonetheless, Ben Casselman posits that the “report shows a job market on cruise control, neither losing ground nor accelerating”:

Whether that’s good news or bad is a matter of perspective. On the one hand, the job market is, by pretty much any measure, the healthiest it’s been since the recession ended five years ago. Growth has topped 200,000 jobs for each of the past six months, the first time that’s happened in the recovery. Unemployment, despite July’s modest increase, has been falling steadily, and layoffs recently hit a 14-year low. Hiring has been fairly broad-based in recent months, with sectors that have been strong throughout the recovery, such as health care and energy, remaining so, while long-time laggards such as manufacturing and construction are showing signs of a rebound. Even the government has been adding jobs in recent months.

Yet for all that progress, the job market has never found a higher gear. Employers have added about 2.6 million jobs over the past year, a rate of hiring that’s risen slowly if at all over the past two years. That growth hasn’t been enough to generate meaningful wage growth — average hourly earnings were up just a penny in July — or to put the long-term unemployed back to work.

Mark Whitehouse focuses on the lackluster wage growth:

Overall, the pace of wage growth in the private sector has been remarkably slow and steady: Hourly earnings rose at an annualized rate of 2 percent over the past three months, roughly the same as over the past year and since the beginning of the recovery in mid-2009. That’s just enough to keep up with consumer price inflation, which has run at an average annual rate of 2 percent since mid-2009. … All told, though, wage gains have been meager, and still trail far behind the pace at which workers’ output per hour has increased during the recovery. A bit more of a raise should be nothing to worry about.

Vinik gives the report a once over:

On the surface, this was a soft report, but it’s not that bad as you dig deeper. The unemployment rate rising to 6.2 percent may not seem like a good thing, but it’s completely expected. As the economy continues to recover, it will draw back in workers to the labor force who had previously given up looking for work. That’s exactly what we see in this report, as the labor force participation rate rose to 62.9 percent. … It’s important to keep this all in perspective. Monthly reports are very noisy and the BLS will revise the July numbers over the next two months. A good way to cut down on that noise is by using a three-month moving average. When you use that, you see that the past few months really have seen a slight improvement in the economy:

Rolling Average

Jordan Weissmann looks on the bright side:

[A]s the Washington Post’s Zachary Goldfard notes, we’ve now managed to add at least 200,000 jobs for six months straight—the first time that’s happened since 1997. The feat was more impressive back then, since the economy and the job market were smaller. But the employment recovery has trucked along at a fairly respectable pace through a winter during which the economy shrank, and a spring in which it grew at a surprisingly quick 4 percent rate.

Neil Irwin’s read on the report:

Nothing about these numbers should change your basic assessment of how the economy is doing, unless you had some outlandish view of how the economy was doing to begin with. Gradual, steady expansion in the job market, and the economy more broadly, continues apace.

Drum’s bottom line:

Overall, the economy still appears to be dog paddling along. GDP growth is OK but not great; jobs growth is OK but not great; and wage growth is positive but not by very much. More and more, this is starting to look like the new normal.

(Chart from Irwin)