The labor market is not one number

The labor market continues to be a roller coaster. November’s job report, released today, saw a rebound in hiring with the economy adding 227,000 jobs—a big jump up from the October report that got revised up to 36,000 jobs added from the original 12,000. Employment declines last month were likely due to the Boeing strike and the impact of hurricanes, suggesting that these job losses were temporary and got reversed this month. These numbers follow job gains of 78,000 in August and 255,000 in September. This is why it’s really important to not focus too much on one month’s report. Equally important, remember that the true picture of the labor market comes from looking across several key indicators. 

Here are some key metrics to track where some are showing improvements over time and others a marginal deterioration:

• Employment: The economy added 227,000 jobs in November against an expectation of 214,000. The numbers for September and October were revised down by 32,000 and 12,000 respectively. Employment growth was spread across healthcare, leisure and hospitality, and government. Employment gains for the previous 12 months averaged about 186,000. 
• Unemployment rate: The unemployment rate ticked up to 4.2 percent. This is up from 3.7 percent one  year ago. Across demographic groups, both men and women had unemployment rates of 3.9 percent. However, there were larger differences across white  (3.8 percent), black (6.4 percent) and Hispanic Americans (5.3 percent).
• Number of unemployed: The number of unemployed is currently at 7.1 million, compared to 6.3 million a year ago. Within this group, those unemployed for longer than 27 weeks—the long-term unemployed—is at 1.7 million. This is up from 1.2 million last year. The long-term unemployed are 23 percent of all unemployed.
• Labor force participation (LFP): LFP is currently at 62.5 percent, which is lower than it was pre-COVID. In February 2020, LFP was 63.3 percent.
• U-6 rate: This rate captures three categories of people (1) total unemployed; (2) all persons marginally attached to the workforce (wanting work but have not looked for work in the previous 4 weeks); and (3) total employed part-time for economic reasons (people who prefer full-time work but have settled for part-time work). The U-6 rate is at 7.8 percent, up from 7 percent a year ago. In April 2020, the U-6 rate was 22.9 percent.
• Wage growth: Average hourly earnings have increased by 4 percent year on year. With inflation at 2.6 percent, this suggests workers are seeing real wages growing.

This snapshot suggests that while the labor market appears decently healthy, there are pockets of weakness and volatility which are likely to play a role in the Federal Reserve’s decision to change interest rates at its December 18th meeting.