In November 2011, the US unemployment rate fell to a surprise 8.6%, from 9.0% in October. This was much lower than market expectations, which was for the unemployment rate to remain unchanged at 9.0%. Unfortunately, the labour market participation rate also fell, to 64.0% in November from 64.2% in October. The decline in the participation rate would tend to overstate the drop in the unemployment rate.
During the month, total non-farm payrolls rose by an encouraging 120 000. The market was expecting a rise of 125 000. Once again, there was a significant upward revision to the previous two months' data of +72 000 jobs.
During 2010, the US economy created 940 000 jobs, or an average of 78 000 jobs per month. That is below the estimated 100 000 increase in the number of people entering the job market every month. However, in the first eleven months of 2011, the job gains have averaged a far more respectable 131 000 a month.
More encouragingly, the private sector added a welcome 140 000 in November, after adding a revised 117 000 jobs in October and a substantial 220 000 jobs in September. Furthermore, the private sector has added 1.711 million jobs this year and has gained employment in each of the past 21 months at an average of 140 000 jobs a month. While this is not spectacular or even remarkable, it is certainly not indicative of a return to recession conditions. In others worlds, the US economy would, typically, not add over 1.7 million jobs in eleven months if it was in recession or about to experience a recession.
Overall, this month’s labour market report is encouraging. The ongoing job gains in the private sector are extremely welcome. In addition, the regular upward revision to prior data implies that there are an increasing number of new start-up companies.
As expected, the government continues to shed jobs, and in November government employment fell by a further 20 000. In total, the Government has cut 278 000 jobs in the past 12 months, which is a decline of 1.25%.
Given the structural economic difficulties in the US (housing market overhang, loss of production activity to emerging markets, huge fiscal constraints, etc), it appears likely that employment will take a number of years to fully recover from the great recession. Employment is still down almost 6.3 million jobs since before the great recession, and a portion of those job losses are likely to become structural in nature. This implies that the US will struggle to return to its desirable or even its historical rate of growth over the next few years.
In the short-term, however, the latest employment numbers suggest that the US economy is likely to continue to avoid slipping back into recession.
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