The US unemployment rate fell to a four-year low of 7.7% in November, it was reported yesterday. The BLS (Bureau of Labor Statistics) report also noted that the economy added 146,000* jobs in November, a better figure than expected, considering Hurricane Sandy. Yet the report did not get a particularly warm reception. Analysts and cynics instantly threw cold water on these seemingly good numbers by stating that the unemployment rate fell only (or largely) because masses of unemployed people stopped looking for work in November and therefore were no longer counted as unemployed. Were they right? Off to the report’s detailed tables!
First, the non-detailed tables. Table A suggests that more than 100% of the drop in the unemployment rate came from people leaving the labor force, which could mean unemployed people giving up looking and no longer being counted as unemployed or in the labor force. The unemployment rate and labor force participation rates both fell by two-tenths of a percentage point, unemployment from 7.9 to 7.7% and labor force participation from 63.8 to 63.6%. The number of employed fell by 122,000*; the number of unemployed fell almost twice as much (229,000); and “not in labor force” rose by 542,000. So it would seem that a lot of people stopped looking.
(*That’s right — the same report that says the net change in jobs in November was +146,000 also says it was -122,000. The reason is that the BLS conducts two different surveys, one of employers (the “establishment survey” of payrolls), which had the positive figure, and one of households, which had the negative one. Barry Ritholtz had a nice cranky comparison of the two a few years back that’s still worth a look. Unfortunately, even though many economists regard the employer survey as more reliable, it tells us only about things like employment, hours, and wages, not about the people in or out of the labor force. For that we still need the household survey. Back to it.)