In surprising news on the U.S. jobs front, the unemployment rate fell to 8.6% from 9.0% a month ago and the economy added 120,000 jobs in November, the Labor Department reported Friday. Analysts had expected the rate to hold at 9%, where it has stood for more than two years.
The news was not all good, however. The unemployment rate dropped partly because of the large number of discouraged job seekers who have left the workforce, the department’s Bureau of Labor Statistics (BLS) said.
In November, the number of unemployed persons, at 13.3 million, was down by 594,000, the BLS reported, adding that the labor force, which is the sum of the unemployed and employed, was down by a little more than half that amount. The number of long-term unemployed, meaning workers who have remained jobless for 27 weeks or longer, was little changed at 5.7 million and accounted for 43% of the unemployed.
The jobs report suggests an expanding economy, but a closer look at the data is not so encouraging, said Steve Blitz, senior economist at New York-based ITG Investment Research, in an analyst note.
“The issue is whether the economy is expanding fast enough to bring down the huge volume of surplus labor. The November employment report confirms that the answer is no as the economy remains rutted in its current 2.5% real growth path,” Blitz wrote. “Yes, payrolls increased last month, but mostly in retail, restaurants, health care and temp services – hardly the stuff of productive expansion.”
Job loss in the state and local government sector, which shed 16,000 jobs, was especially acute.
Neil Dutta, U.S. economist with Bank of America-Merrill Lynch, pointed to another positive, with the BLS’ 72,000 upward revision of new jobs in September and October. “Over the last three months, the U.S. economy has been generating roughly 145,000 jobs per month—not a blow-out, to be sure, but still ahead of what he saw in the summer,” Dutta wrote in an analyst note.
Still, he called the unemployment rate’s decline “half baked,” noting that while the household measure of employment rose by 278,000, the labor force actually declined by 315,000.
“When the unemployment rate declines, we want to see both employment and participation increase as discouraged workers return to the labor force,” Dutta wrote on Friday. “Today, we got the former, but not the latter, making the 0.4% drop look a bit suspect. We would not be surprised to see the unemployment rate give back some of its decline in the coming months.”
Read about last month’s U.S. jobs report at AdvisorOne.com