The more you drill down into the November jobs report, the worse it looks. On the surface, not so bad. Nonfarm employment increased by 146,000 jobs last month, beating expectations of around 93,000. What’s more, the jobless rate fell to 7.7%, the lowest since December 2008, versus expectations of 7.9%. And the broader U-6 rate — taking into account some discouraged workers and the underemployed — fell to 14.4% from 14.6%. Private sector jobs rose by 147,000.
But those numbers, unfortunately, are only part of the story. As Citigroup notes this morning, “Far more robust monthly averages than 150,000 jobs per month would be needed for a true restoration of normal labor markets.” Here’s why:
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.
Bottom line: The November jobs report showed job creation far too slow to get the labor market back to pre-recession levels or boost wages. Faster, please.