Employment Numbers: Good or Bad?

Don’t you hate it when the best answer to that question is a variant of: “well, it depends”?

But it does.

It depends on whether you read the household survey first or the establishment survey.

The household survey was taken a week earlier and thus captures the blip caused by hurricane Sandy. The good news is that the unemployment rate dropped to 7.7%. The bad news is that this decline was caused by a sharp drop in the workforce. The number of people working dropped 122,000, but because the number of people in the workforce dropped even more – by 351,000 – the ratio of employed people in the total workforce rose. Thus the unemployment rate fell.

Is this good or bad?

It depends.

If the survey failed to adjust properly for Sandy then the decline in the workforce may be less than reported and the number of jobs higher. What that would do for the unemployment rate we can’t guess without knowing the extent of the error. Which is my way of saying these numbers leave us in the dark. Somewhat.

The one thing we can say unequivocally is that whatever happened isn’t sufficient. The economy is still crawling along and not generating new jobs at the rate we require to push the unemployment rate down to an acceptable long term level. This is particularly true when we look at the expanded definition of unemployment to include those who are discouraged and thus not even attempting to find work, and those who are working part time instead of full time. This so-called ‘U6’ measure of unemployment stands at 14.4%, down from last month’s 14.6%, but still way too high. Plus the workforce participation rate fell to 63.6% a rate way too low to indicate a healthy economy.

In contrast to all this the establishment survey was both relatively uncluttered and encouraging.

The service sector generated plenty of jobs, with retailers adding 53,000; professional service businesses adding 43,000; the leisure and hospitality industry added 23,000; and health care added 20,000. The only significant downside came from an expected quarter: construction businesses shed 20,000 in anticipation of the slower work rate during the colder months. Government employment was unchanged.

Neither average wages nor the average workweek budged much at all.which is an indicator of a stalled economy going sideways rather than up of down.

So, despite the encouraging headline figures today’s news is a decidedly mixed blessing. The past few months have seen a shift for the better – the aggregate numbers over the last six months have shown a stinger trend – but there is nothing to get particularly excited about.

So, are the numbers good or bad?

It depends.

Is the glass half full or half empty?

That’s the kind of economy we have nowadays.