In the spirit of the season I won’t go all Scrooge on the employment report (BLS link). Everyone else seems willing to accept it as good news, so I see no reason to quibble.
But! It seems a little too good to be true.
The headline numbers were a decrease in the unemployment rate to 10% from 10.2% last month, only 11,000 jobs lost last month, September’s job losses revised downward from -219,000 to -139,000 and October’s losses also revised down from -190,000 to -111,000. If you believe the numbers there is a trend there.
Still what keeps eating at me is why is this report and the revisions so at odds with all the other data that has come out recently. The ISM reports, the ADP report yesterday, the weekly unemployment numbers and private forecasts were all indicating, at best, little change. Somehow it doesn’t all hang together.
So, for now, let’s just file this one under a little bit of unexpected Christmas cheer, accept it at face value and see what January brings. Hopefully, it’s more of the same but ….
UPDATE:
Here’s the WSJ Real Time Economics blog compilation of economists’ reactions to the report. Note that only one seems to share my scepticism. I highlighted that one.
This is one of those game-changer reports that should fundamentally alter the perception regarding the economy. We have been steadfast in our belief that the labor market is stabilizing and that payrolls would turn positive around the turn of the year. It is safe to say that many if not most economists have been skeptical that the labor market would perk up, and the jump in the unemployment rate in October seemed to reinforce the negativity around the labor market. Today’s number was a little more and a little faster than we had expected, but it largely jibes with our broad evaluation of the employment picture. However, it should spark a much more significant re-assessment of the economic situation among market participants and the consensus at the Fed. –Stephen Stanley, RBS
This report should reduce anxieties about the sustainability of the recovery. However, given the large degree of slack in the labor market, this report does not change our view that the Fed is going to be on hold through next year. –RDQ Economics
It will be interesting to see if the Fed begins to shift their recent dovish rhetoric in response to this report. It’s still too early to remove monetary accommodation but if officials continue to emphasize downside risks and don’t start to pave the way for an eventual shift in policy, the bond vigilantes may begin to express some displeasure. –David Greenlaw, Morgan Stanley
Wow! That is the only description I can make of the November jobs report. Payrolls were down, but by a minimal amount. Just as good were the revisions to previous months, which now show significantly smaller employment losses. When you have downward revisions to the losses it indicates there was some acceleration in activity that was not initially picked up and that is a great sign. We still have some major problems in construction and manufacturing, which together lost nearly 70,000 workers. In addition, the increases in payrolls were not as broad based as I would like to see. Retailers, wholesalers, information services companies, finance, real estate, insurance and hospitality all were off. Where we saw gains was in temporary workers, education and health care. The percentage of industries that posted gains did rise indicating that there is a broadening in the hiring. –Naroff Economic Advisors
The average workweek lengthened to 33.2 hours from 33.0 hours previously. The report suggests firms have stretched the productivity of the current workforce to its limits, and will likely soon begin adding staff. We had previously forecasted that the first increase in payrolls would come in January, but today’s result suggests the economy may reach that milestone in the current month. . –Nomura Global Economics
The economy received an early holiday present in the November employment data, a big upside surprise and the best report in two years… If the October payroll report made the labor market appear overly bleak, November’s report may overemphasize early improvement in the economy. The labor market is still shedding jobs at a brisk clip and the unemployment rate will climb again next month, continuing its rise toward a likely peak of 11%. –Joseph Brusuelas, Moody’s Economy.com
The revisions to the two prior months were quite considerable, totaling 159,000 jobs… This continues an important trend reversal which previous month’s job losses are revised to show less negative numbers… It is no longer a question of how many more jobs we lose but rather how quickly we add them back. –Dan Greenhaus, Miller Tabak
The economic recovery may be gathering momentum. Nevertheless, the bottom line is that five months after the recession ended, the economy is still shedding jobs. Tight credit conditions, uncertainty about the economic outlook, state level fiscal tightening and strong productivity growth are all holding back job creation. None of these factors are likely to fade any time soon, suggesting that the labour market will continue to be this recovery’s Achilles heel. –Paul Ashworth, Capital Economics
The recovery in the job market continues, at a pace that will now make politicians happy, with the job losses at just 11,000… Unemployment rates drive politics and those politics will continue to be difficult even at 10%. –John Silvia, Wells Fargo
This was a shocking report because the reported payroll data bear little resemblance to any other evidence concerning the labor market, including the ADP survey which is based on hard data from a much wider sample of payrolls than is the government’s survey. Other evidence pointing to considerably weaker conditions are continued anemic readings on consumer confidence and sentiment (including specific questions concerning the labor market), employment sub-indices in ISM and other surveys, etc. Still, this is the “official” picture, and until reported otherwise by the government, these are the numbers in the books, as questionable as they may be. –Joshua Shapiro, MFR Inc.
The positive job creation that occurred in certain segments of the industry data is encouraging. Additionally, the slowdown in the pace of decline in a handful of other sub-components squares up nicely with the improvement we have been seeing in the weekly jobless claims reports. On the flip side though, the duration of unemployment continues to increase while earnings remain soft. The main story here is that job destruction is continuing to soften, while job creation is waking up from a long hibernation, albeit very slowly. –Ian Pollick, TD Securities
One unfortunate statistic is that the% of unemployed that have been out of work 27 weeks and longer jumped to 38.6% while the group unemployed less than 5 weeks dropped to 18.2%. In other words, while the employment picture is brightening the economy is still far from bringing down the longer term unemployed. It will happen at some point but once these people get back to work they will likely spend a lot more on rebuilding lost savings than on buying new stuff. –Steven Blitz, Majestic Research
Note that the headline adjusted number is also far better than is implied by the level of jobless claims, even allowing for the recent drop. There is no doubt the underlying trend in payrolls is improving, but this looks a bit too fast. Looking ahead, though, the continued big gains in temp hiring do suggest headline payrolls will be positive by the end of first quarter, so it seems to be just a matter of timing. –Ian Shepherdson, High Frequency Economics
Revised seasonal adjustment factors accounted for roughly a third of the 159,000 net upward revision to September-October, but the seasonal adjustment to November was more restrictive than a year ago: the seasonally-adjusted level of employment would have been 138,000 higher had last year’s seasonal adjustment factor been used. –Alan Levenson, T. Rowe Price
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