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Unemployment rate decline not as good as it sounds

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Brian Snyder/Reuters/File

(Read caption) A "Help Wanted" sign in the window advertises a job opening at a dry cleaners in Boston, Massachusetts. The unemployment rate dropped to 8.6 percent in November, and the private sector added 140,000 jobs.

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Employment was up 120,000 last month and the unemployment rate dropped significantly, to 8.6% in November down from 9% in October.  Job growth in October and September was revised up by 72,000.

While the employment story has improved over the past few months, the decline in the November unemployment rate isn’t as good as it sounds.  People who drop out of the labor force, like those who give up looking for work, are not counted in the jobless rate, and about half of the 0.4 percentage point decline was due to this factor.  In fact, about 190,000 of the unemployed left the labor force last month.

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Once again, the private sector added jobs—140,000 last month—and the public sector cut them (down 20,000).

The report is consistent with slightly better economic performance over the past few months.  It’s always useful to average over a few months to work out some of the monthly noise in the data and over the past three months, employment is up by an average of about 140,000 per month, compared to 84,000 over the prior three months.

But there’s still a great deal of slack in the job market.  Average weekly hours worked didn’t budget and hourly wages ticked down slightly—over the past year, hourly earnings, before inflation, are up 1.8%, well behind inflation.

In other words, we’re a long way away from providing job seekers and workers with the job and wage increases they need to get ahead.  Outside of the public sector, we’re at least moving in the right direction, but very slowly.

Details to follow, including a link to Chad’s analysis when it’s ready.