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Unemployment rate falls for November, but is it for the 'wrong' reason? (+video)

November's unemployment rate, 7.7 percent, may have been affected by superstorm Sandy. About 370,000 Americans reported last month that they couldn't work because of the weather.

The US economy added a 146,000 jobs in November and the unemployment rate fell to 7.7 percent, the lowest since December 2008.
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The economy added 146,000 jobs in November, and America's unemployment rate fell to 7.7 percent, according to new Labor Department numbers that show the US job market mending steadily but slowly.

Job growth was better than economists had expected. But this welcome news was offset by downward revisions to the official estimates of job gains in two previous months.

The decline in unemployment, meanwhile, came because of what many economists call the "wrong" reason – people dropping out of the labor force. Because fewer Americans were looking for work, the jobless rate fell 0.2 percentage points from October to November.

Normally, in a job market that's growing stronger after a recession, rising employment should coincide with rising numbers of people reentering the labor force.

That may start happening in 2013 – or even in December. But for November, the job-market numbers may have been influenced by an important twist known as superstorm Sandy. The storm, which hit the East Coast just before the month of November began, may explain why the labor force shrank.

About 370,000 Americans reported last month that they couldn't work because of the weather – about five times the normal number for November. To the degree that the decline in the labor force was linked to storm damage in places like New York City and New Jersey, those numbers may adjust the other way in the next month or beyond.

So it's probably wise not to read too much, good or bad, into the Labor Department's report for November.

Moreover, another big storm, of sorts, looms over the labor market: the tumultuous negotiations in Washington over the "fiscal cliff" of tax hikes and federal spending cuts that are set to take effect in January. Both sides say they want to avoid steep tax hikes that would slow the economy. But the outcome of the negotiations remains uncertain.


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