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The presidential campaigns have been fighting for quite some time about the health of the economy, so it is fitting that the last substantive piece of information to enter the debate before Election Day (probably) is this morning’s employment situation report.
Released just a couple hours ago, here are the headline numbers: A 171,000 increase in total nonfarm payroll employment and a 7.9 percent unemployment rate in October.
Okay everyone, let’s step back from the election and take a breath.
This is a good report. It’s not a great report, but it’s a good report. It suggests to me that the labor market is heading in the right direction — and at a faster pace than was previously thought. However, the labor market still isn’t improving fast enough. The labor market is experiencing moderate improvement, but we’re far from rapid improvement. And rapid improvement is what we need to close our massive jobs gap.
The jobs number looks pretty good. The consensus forecast was for 124,000 new nonfarm payroll jobs in October — much less than the 171,000 increase reported by the BLS. It’s always good to beat the forecast, and this month the labor market gave the forecast a good hard slap in the face. Adding to the good news is that the numbers for the previous two months were revised upwards by a solid 84,000 jobs. This brings the three-month average — a much better measure than looking at one month in isolation — to 170,000 jobs per month.
If we can continue to create 170,000 jobs per month, then most economists (including this one) would agree that we can slowly but steadily bring down the unemployment rate. It’s won’t fall as fast as it should in a solid recovery, but it will continue to fall.
Let’s step back and look at the bigger picture. We’ve averaged 157,000 new nonfarm payroll jobs per month in 2012, right on par with 2011’s average of 153,000. However, the average for October, September, and August 2012 is an increase of 170,000 per month. The average increase for September, August, and July was 174,000 per month. If the labor market can keep this going, then 2013 will look significantly better than 2011.
The encouraging news this month was in the private sector. Nonfarm payroll employment gains in the private sector were 184,000 for October, beating the headline number as government employment fell.
Economists typically put more weight on the establishment survey than on the household survey for statistical reasons. So the good news above should be given more weight than what we’re about to discuss in the household survey.
In the household survey, we find that the headline unemployment of 7.9 percent in October is up a hair from September’s number, 7.8 percent. But it’s important not to read much of anything into this increase — the most reasonable interpretation of this uptick is that the unemployment rate is basically the same in October as it was in September.
A significant bright spot in the household survey is that the number of folks employed part-time but who would like a full-time job dropped by a solid 269,000, giving some relief to the concerning 582,000 increase in this indicator in the previous month. Still, there are a concerning 8.3 million part-time workers who want full-time work.
The broadest measure of labor underutilization — which includes people employed part-time for economic reasons and people marginally attached to the labor force — is basically the same as in the previous month, dropping just a bit from 14.7 percent in September to 14.6 percent in October. In the twelve months before the recession this indicator averaged 8.3 percent. A healthy labor market would see us returning to around eight and a half percent at a fairly rapid clip. Despite a good month, we’re still quite a ways from that.
A couple of things that I unfortunately feel the need to throw out there. Hurricane Sandy had no effect on this report. Quoting from the front page of the report: “Hurricane Sandy had no discernable effect on the employment and unemployment data for October. Household survey data collection was completed before the storm, and establishment survey data collection rates were within normal ranges nationally and for the affected areas.” And the BLS did not cook the books. The unemployment rate is still below eight percent, and that isn’t because of a government conspiracy. (Good grief, I feel like I need to take a shower after having written that last sentence.)
Perhaps the most concerning statistics in the report describe the long-term unemployed, whose numbers increased to an even 5 million, representing a whopping 40.6 percent of the unemployed. The median duration of unemployment also is longer, now at 19.6 weeks. This does not bode well for the 170,000 newly unemployed persons.
These five million folks are seeing their human capital decay. They may be stigmatized in the labor market — employers might be reluctant to take a chance on them. Many are in their prime earning years but may not be able to find a job which matches their skills. The presidential candidates have largely ignored these suffering Americans, focusing instead on typical election-year silliness. Let us hope that the next president doesn’t do the same.
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