Jobs Report, First Impressions

November 2nd, 2012 at 8:28 pm

Well, the big jobs report is out showing payrolls grew by a more-than-expected 171,000 last month and the unemployment rate ticked  up slightly, as expected, to 7.9%.  Job growth for the prior two months was revised up by 84,000, and the average monthly pace of job growth over the past four months–a useful way of smoothing out monthly noise in the data–is 173,000, a sharp acceleration over the second quarter’s pace of 67,000 per month (see figure).

The uptick in unemployment was expected after September’s 0.3 percentage point drop, but a few things are worth noting.  First, the 0.1 point increase is statistically indistinguishable from no change at all–the unemployment rate has to rise or fall about 0.2 points to be significant.  At 7.9%, the jobless rate is down significantly–by one full point–from its rate one year ago.  Second, one reason for the slight uptick was more people coming into the labor market seeking work.  We’ll need to see how this development evolves in coming months, but we may be seeing early signs of an improving job market pulling more job seekers in from the sidelines.

All told, given the acceleration in payroll growth, the upward revisions to prior months payroll gains, the trend decline in unemployment, and the pick-up in labor force participation, today’s report is generally pointing to job market that’s showing signs of improvement.

Obviously, a report like this just a few days before a tight election is going to be a very big deal, and both campaigns will use the results in predictable ways.  But if there’s anyone out there who’s making up their mind based on this one report, please don’t.  Yes, the monthly employment numbers provide important information about the part of the economy that matters most to people, but that information  must be considered as but one relatively noisy set of indicators amid a sea of others.

I always stress, as I did above, the importance of smoothing out some of the monthly noise by averaging over the past few months.  As noted, employment growth slowed notably in the second quarter of this year, increasing by only 67,000 jobs per month, but has since accelerated up to an average monthly gain of about 170,000 over the past four months.

Some details:

–The effects of hurricane Sandy are not in these numbers as the October surveys were fielded well before the storm hit.

–Manufacturing added 13,000 jobs last month, after shedding 14K and 13K jobs in the prior two months.  Over the past year, factory employment is up by 189,000, and up about 500,000 since the sector began to recover in early 2010.

–Both hourly and weekly earnings are up, before inflation, by about 1.5% over the past year, trailing the recent trend in prices, up around 2% since last September.  Average weekly hours have also been flat over the past few months, suggesting employers are meeting increased labor demand by adding workers rather then extending shifts.

–Most industries added jobs last month; professional services led with 51,000 jobs, retail stores added 36,000 jobs in October, compared to 27K and 18K in the prior two months, perhaps reflecting stronger consumer activity and confidence.

–Construction was up 17,000 last month, driven by both residential and commercial contract work.  The sector is showing some early signs of the formerly moribund housing market coming back to life.

–Government employment, however, fell again in October, down 13,000.  After posting large losses since the downturn, over the past state and local payrolls have been essentially stagnant.

 

Source: BLS, my annotation.

 

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5 comments in reply to "Jobs Report, First Impressions"

  1. save_the_rustbelt says:

    The biggest problem for this decade will be chronic underemployment.

    There are too many jobs with 1970s level wages and minimal benefits.

    Weak real incomes …. weak consumer spending … weak business cash flow…weak real incomes….


  2. Nhon Tran says:

    Thank you. I agree that, overall, the numbers suggest some accelerated improvement in the labour market.

    I note that the s.a. unemployment estimates for African American, for the long-term unemployment, and for the 25 years and over with less than a high school diploma showed some fluctuations between August, September and October.


  3. Brenda says:

    I know this is off topic but please bear me out.

    I called up the Jason Lewis show (a right wing radio host) and tried to debate with him about the nonpartisan Congressional Research Service (CRS) study they issued in September that showed that cutting tax rates for the wealthiest Americans did not spur economic or job growth.

    He gave me some BS about it being a “static” study and then dismissed it out of hand. Conservatives really like “dynamic” economic studies because they seem to validate their economic agenda.

    I’d like to ask for any information from someone knowledgeable that might help me rebut his claims as I plan on calling him back if I have a better argument. Even better perhaps a post on the CRS study along with an explanation on the comparative merits of dynamic vs. static economic analysis.

    Not that it will have much an effect on Jason Lewis, he has a Masters in economics which in his case means he can pile on the BS masterfully. ;)


    • Jared Bernstein says:

      Ignorant nonsense. Virtually all of the results in the report are based on “time-series” analysis–observing trends in the relationships between the key variables over many decades. That is, by definition, dynamic analysis.


  4. bakho says:

    People vote based on experience. People experience the job market through their own job search and those of family and friends.

    The numbers simply elucidate what the electorate is experiencing. The electorate is informed by experience. The governing elites may or may not be informed by the numbers.


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