Why did the unemployment rate drop so much? There are good reasons and bad. While the economy is in fact adding jobs, it is also true that many Americans may have given up looking.
After months of hovering around 9 percent, the US unemployment rate took a sudden turn for the better in November, falling to 8.6 percent.
Call it holiday cheer. Call it relief for workers who value job security. Call it hope for would-be workers without jobs.
It may be all those things, but why did it happen?
The sharp improvement seems puzzling, at least on the surface. The same labor report showing the jobless-rate dive also found that non-farm employers added 120,000 jobs during November. That's OK, but nothing better than other typical months throughout this whole year. Meanwhile the unemployment rate had (with some ups and downs) gone from 9.0 percent in January to that exact same number in October.
Often, economists say 120,000 jobs is just enough to keep the jobless rate from rising, because about that many newcomers can arrive in the labor force in a given month. A hundred thousand jobs is a drop in the bucket, with some 154 million people in the work force.
Also, it's rare for the unemployment rate to move that much in a single month. The last 0.4 percentage-point change, for the record, came about a year ago, in December 2010.
The latest month's puzzle has several explanations. Some are upbeat, signaling genuine progress in the job market. But this is also a case in which the economy's reality may not be as strong as the headline number implies.
First, let's deal with the bad news.
Unemployment can fall for reasons other than people finding jobs. It can also happen when people stop looking for work, in which case they are no longer counted as unemployed members of the labor force. That happened in November in a big way. The labor force shrank by 315,000 people, even though the nation's adult population grew.
Now the brighter news. The number of Americans who have jobs may have risen by a lot more than 120,000 last month. The reason is that the jobs number that the Labor Department emphasizes (the so-called "payroll" number reported by employers) isn't the only job number around.
The unemployment rate is actually based on an entirely different tally of employment, called the household survey. In November, employment rose by 278,000, according to this survey. That's the estimate based on the number of people who said they have a job, when asked by the Labor Department.