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Unemployment Rate Drops to 4-Year Low, 146K Jobs Added

Superstorm Sandy blew a hole not in the nation's labor market, but in economists' crystal balls as the economy added 146,000 jobs and the unemployment rate fell to 7.7 percent--the lowest level since December 2008--the ""Bureau of Labor Statistics (BLS)"":http://www.bls.gov/news.release/pdf/empsit.pdf reported Friday. Economists had forecast payroll growth of 93,000, down from 171,000 as originally reported for October, and an increase in the unemployment rate from 7.9 percent to 8.0 percent.


The storm, which struck the Northeast at the end of October, had been expected to stall new hires and business creation.

Job growth for October was revised downward to 138,000, and growth in September was revised to 132,000 from 148,000.

While the drop in the unemployment rate was a positive sign, it was driven largely by a drop in the labor force, which fell 350,000 in November as both the number of individuals employed and unemployed fell. According to BLS, 12,029,000 people were unemployed in November, down 229,000 from October, and 143,262,000 people were working, down 122,000 in the month.
BLS shrugged off the impact of Hurricane Sandy on the data.
“Hurricane Sandy made landfall on the Northeast coast on October 29, causing severe damage in some states,” BLS said in its report. “Nevertheless, our survey response rates in the affected states were within normal ranges. Our analysis suggests that Hurricane Sandy did not substantively impact the national employment and unemployment estimates for November.”

As it does every month, BLS will release a more detailed geographic employment situation report with regional and state labor market data that could reveal more about the storm’s impact. That report is typically released two to three weeks after the Employment Situation report.

Beyond the increase in jobs and drop in the unemployment rate, average hourly earnings in November rose to $19.84 from $19.81 in October, while average weekly hours also rose. Taken together--along with the increase in payroll jobs--the report indicates an increase in aggregate personal income to help boost consumer spending.

The labor force participation rate--a key number reflecting confidence--slipped to 63.6 percent in November (matching its September level) from 63.8 percent in October. The employment-population ratio, which captures the percentage of all individuals over 16 who are employed, also fell back to its September rate of 58.7 percent after improving to 58.8 percent in October.

According to the BLS, the number of multiple jobholders increased in November increased by 198,000, which suggests--arithmetically, at least--all of the newly created jobs in the month went to individuals who already had jobs, though the number of part-time workers fell 337,000.

The number of self-employed workers also rose in November, rose 190,000 to 9,740,000.

Private sector jobs rose 147,000 during the month, with government contracting by 1,000, marking the 26th straight month private sector jobs have increased.

Virtually every industry sector showed job growth in November, led by leisure and hospitality, which added 42,000 jobs, and professional and business services, which added 39,700. The number of retail jobs increased by 33,800. According to other data in the report, leisure and hospitality and retail trade are the two lowest paying industry sectors.

Temporary jobs accounted for half of the gain in professional and business services, adding 19,700 jobs in November. An increase in temporary jobs is often cited as a positive sign with the argument they are an entry way to permanent employment, but temp jobs also suggest a lack of confidence on the part of employers to make a commitment to an increase in staff.

Within the financial sector, which gained 1,000 jobs in November, the number credit of positions--essentially loan underwriters--rose marginally. The number of real estate jobs, however, declined.

The frequently cited alternative measure of unemployment fell to 14.4 percent from 14.6 percent. That measure includes individuals “marginally attached to the labor force” and not meeting the definition of unemployed as well as those “working part time for economic reasons.” To be considered “unemployed” by BLS an individual has to be out of work, available for work and looking for work.
Long-term unemployment--27 weeks or longer--fell 216,000 in November to 4,786,000, the lowest level since June 2009.
The report also showed “job leavers” among those unemployed fell to 992,000 in November from 1,010 in October, signaling a slight dip in confidence in the ability to find a new job.

The unemployment rate among college graduates was unchanged at 3.8 percent (from 4.1 percent in September), good news for the housing sector, as college graduate are more likely to be homeowners than those who did not complete college.

BLS changed its methodology for this report, shifting the “reference week” from the week including the 12th calendar day of the month to the week including the 5th so that survey interviews did not have to be conducted during Thanksgiving week. For the jobs survey, an individual paid for even one hour of work during the reference week is counted as a job and an individual who worked for any part of the week is counted as employed.

The storm appeared to have little impact on the number of firms reporting data to BLS. According to supporting material, 76.2 percent of businesses submitted payroll data for November, up from 72.0 percent one month earlier for the first report of October payrolls. For the second report, 92.0 percent submitted the voluntary report.

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.

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