BLS Brings Some Holiday Cheer

Relatively good news from the BLS this morning: in November, the unemployment rate fell from 10.2% to 10%.The unemployment rate is calculated from the household survey, which reports 227,000 more people were employed and 325,000 fewer were unemployed - the difference is largely attributable to people leaving the labor force, possibly because they have given up on finding a new job (to be counted in the labor force, you must either be working or looking for work). Accordingly, the labor force participation rate ticked down again, to 65%.If the labor market is truly turning around (and it does seem to be) we may soon see people re-entering the labor force, which would actually cause the measured unemployment rate to rise in the short term.

The establishment survey - which has a larger sample - reported a decline of 11,000 jobs (red line in the first graph). Less dramatic than the household survey, but a much smaller decline than recent months, and much better than expected. Moreover, a revision to the October and November figures reduced the jobs lost in those months by 159,000.

Floyd Norris is optimistic about the speed of the recovery:

One reason is the sheer abruptness of the decline in employment during the recent recession. (Yes, I think it is over.) After Lehman Brothers failed, the unemployment rate rose at a faster clip than at any time since 1975. There was something approaching panic among employers. They feared sales would collapse and that credit would be unavailable. In that spirit, they cut every cost they could. Imports plunged because no one wanted to add inventory. Ad spending collapsed. And people were fired.

That has left many companies in a position where they may need to add workers quickly for even a small increase in business.

Not surprisingly, Paul Krugman plays the grinch:

Today’s unemployment report was good news. But in a real sense good news is bad news, because this month’s not-too-bad number deflates the sense of urgency.

The fact remains that realistic projections show unemployment staying disastrously high for many years.

More on the employment report from David Leonhardt, Justin Fox.

Note: The charts were created using the St. Louis Fed's wonderful FRED tool. They have provisionally removed the shading for the recession at July, 2009, but the NBER business cycle dating committee has not yet officially a declared a date for the trough of the recession that began after the Dec. 2007 peak.