the November 2011 Empoyment Situation report: upward revisions show a healing economy

the report

Before the opening of equity trading in New York on Friday December 2nd, the Bureau of Labor Statistics released its monthly Employment Situation report for November.  The results:

–the establishment survey (of large companies and government agencies) showed that the economy added 120,000 jobs last month;

–the household survey (of 60,000 workers) indicated that the unemployment rate had dropped from 9% of the workforce to 8.6% .

As has been the case for over a year, the job additions are the result of stronger private sector performance— +140,000 jobs –and government sector weakness— -20,000 jobs — as states and municipalities continue to bring their spending back in line with revenues after years of excess.

the revisions

September figures underwent their second, and final, revision.  The initial report two months ago showed a gain of +103,000 jobs (+137,000 in the private sector, -34,000 in the public).  The October ES report revised that up to +158,000 (+191,000 private sector jobs, -33,000 public sector).  The current report revises the figures up again, to +210,000 (+220,000 in the private sector, -10,000 in the public).

October numbers were initially reported as +80,000 jobs (+104,000 private, -24,000 public).  The November ES report also revises October up, to +100,000 jobs (+117,000 private, -17,000 public).

Adding the initial November job gains to the most recent revisions for the prior two months indicates that the US economy has 200,000 more citizens working than we thought a month ago.

Over the past three months the economy has added about a half-million jobs .

economists’ reaction

Comments in the media by professional economists were, to my mind, surprisingly downbeat.

I can see three reasons for this:

–the quirky ADP employment report, which came out on Wednesday, showed the economy added +206,000 private sector jobs last month.  By contrast, the official figure of +140,000 looks a bit tepid.

–the 8.6% unemployment rate isn’t as positive as it seems.  Recent graduates looking for their first jobs aren’t counted as unemployed, nor are “discouraged” workers who have lost their jobs but quit looking for new ones.  Maybe this isn’t ideal. but it’s the way the unemployment rate calculation is designed.  The current drop in the unemployment rate appears mostly due to changes in non-counted groups.

–the monthly job gains need to be 200,000+ to begin to bring the unemployment rate down.

I think economists’ bearishness is overdone.   Today’s US economy is in a lot better shape than it was a year ago.  The private sector numbers are improving, and are at the point where enough new jobs are being created as here are new graduates coming into the workforce.  For some time, companies have been reporting shortages of workers in certain areas. And the most recent BLS report on job openings indicates there are still about three million private sector jobs as yet unfilled.

It could be a lot worse.

stock market reaction

It may sound a little too simple, but I think the stock market is coming to the conclusion that after six months all the money that’s going to be made by being bearish has already been made.

Yes, the future of the Eurozone is still a big issue.  But recent developments suggest that the outlines of a resolution are being sketched out now–and that the end result may not be nearly as bad as the consensus has been expecting.

So, I think the stock market is starting to look for reasons to be bullish.  The November ES report isn’t by itself a sufficient reason to be bullish, but it’s another confirming indicator.  My guess is that despite the negative tone I detect in economists’ and market commentators’ recent remarks Wall Street will continue to move higher.





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