Yes, The November Jobs Growth Was Really That Strong

Posted by jbrumley on December 6, 2019 8:03 PM

Bingo! Friday's look at last month's payroll growth and hourly pay was truly as good as headlines suggested, if not better. The economy may have a couple of soft spots, but consumer income isn't one of them. Neither is the discretionary spending that goes along with it (though that's another story).

The headline numbers: The U.S. economy added 266,000 new jobs last month versus expectations of only 187,000 -- the best reading since January's surge. That was enough to drive the unemployment rate back down to a 50 year low of 3.5%, compared to October's 3.6%....  the same 3.6% forecasters were calling for.

The strong numbers weren't just the result of some fortuitous timing or data quirk. Everything else about November's jobs figures were similarly strong. Perhaps most important, the number of people with jobs swelled to a record 158.59 million, up 390,000 from October's 158.51 million. Simultaneously, the number of individuals officially unemployed (on unemployment benefits) came in at 5.81 million, down -- but just a hair -- from October's figure. The number of people not technically in the labor force but still interested in a job ticked up from 4.75 million to 4.83 million. It's just that raw job growth was still strong enough to significantly offset the lack of progress of other measures.

Underscoring the overall lack of proportional progress is the labor force participation rate, and the corresponding employment/population ratio. There's 61.0% of the population now working, coming in at the same level seen in October and September. The bigger-picture trend is still pointed higher. The labor force participation rate -- the number of people with a job or wanting a job (employed or not) -- scaled back from 63.3% to 63.2%, though its bigger trend is also on the rise. The 2.2% difference between the two was 2.3% a month earlier, explaining how the unemployment rate itself edged a little lower last month.

The trifecta, metaphorically speaking, is the improvement in hourly pay rates. They were up 3.1% versus expectations of 3.0%, extending a growth streak that's been in place since 2015. That growth trend was reignited after a lull in 2018, with hourly incomes now at an average of $28.29. That's another record, though constant new records aren't necessarily unusual. It is unusual, however, to see hourly pay rates continue to plow into record-high territory with total employment levels being this high for this long. The hourly pay chart below is only "as of" October, but the trend is clear all the same.

Critics poked holes in the report, of course, suggesting seasonal hiring explains the swell. It doesn't though... not completely. Seasonal hires would generally lower the average hourly pay rate. In fact, employers are struggling enough to find permanent employees. It's even tougher to find someone to willing to take a temporary job. People don't need them anywhere near as much as they used to. It's also worth noting that the payroll growth figure is a seasonally adjusted number, which squeezes out any seasonal hiring effect.

Once again, we have to give the jobs report a grade of A. It would have been nice to see the total headcount of unemployed people slide a little lower, with a corresponding improvement in participation rates. But, that's a nitpicky demand given everything else that's going well.

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