Last week, the November job report was released, which showed that unemployment had dropped to 7.7%, the second month in a row of .2 percentage point decline. Despite fears that super storm Sandy would impact the data, the Bureau reported that data from the affected areas were within the normal ranges.
As we do every month, we dig deeper into the data to get a better sense of the national employment situation.
1) Workforce Participation Rate Drops back to 63.6%
After 3 months of positive gains in this all too crucial statistic, November saw the participation rate drop by .2 percentage points. As mentioned last month, the rate has fluctuated between 63.5 and 63.9 for all of 2012. With the exception of earlier this year when the rate hit 63.6%, the last time that workforce participation rate was this low was 1981. Given the depth and duration of the current economic malaise, some of the initial signs of recovery will be found in this data point. As people who have left the workforce, believing there are no jobs become more optimistic about their job prospects, rejoin it, driving the rate higher. After this month’s drop, there is not data to suggest that this is the case yet.
2) The number of people unemployed dropped but more than 200,000, but….
The drop of just over 200,000 from the ranks of those considered unemployed is in part, what caused the unemployment rate to fall to 7.7%. However, as is with most of these data points, there is a caveat. While some certainly found employment, (household data shows a loss of 100k jobs while the more accurate establishment data shows 140k created), the civilian labor force shrank by 350k and those not in the labor force but seeking employment rose by 230k. Did those 200k get jobs or did they just drop out of the workforce? It is impossible to say with any certainty which it is, but the drop in the civilian labor force lends support to the idea that a good portion left the workforce.
3) U-4 to U-6 Rates are mirroring the official rate decreases
While this is an encouraging move, as noted in an earlier piece, there has been a massive disconnect between the wider measures of unemployment and the official rate. Were a recovery fully underway, the U-4, U-5, and U-6 rates would be falling at a rate faster than the official rate to return to pre-recession norms rather than just mirroring the decrease.
The Revised Rate: (Methodology)
Taking into account workers no longer in the work force, but would like a job, the unemployment rate for November would be: 9%, the same it was in October.