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Examining the Jobs Report


The employment situation improved dramatically in November. Although payrolls declined 11,000, they were up 148,000 including revisions to the last two months. Given the recent trend of upward revisions, it’s probable that the November number itself will be revised into positive territory in the next couple of months. However, the best part of the employment report was that the total number of hours worked in the private sector increased 0.6 percent, which is the equivalent of a stunning 660,000 jobs. In other words, if the number of hours per worker had remained unchanged in November, the increase in labor demand could have pushed payrolls up a huge 650,000. No wonder that civilian employment — an alternative measure of job creation — increased 227,000. Given the economic growth we’ve had since the summer, the jobless rate may have peaked at 10.2 percent in October, and has just started a downward trend with the November decline to 10.0 percent. The jobless rate will not decline every month, but is likely to be significantly lower by late next year.

Leading signals of improving demand for labor jumped out of today’s report. Temp employment increased 52,000, the fourth consecutive gain; overtime hours in the manufacturing sector are up 30 percent versus eight months ago. The only cautionary part of today’s report was that average hourly earnings were up only 0.1 percent in November, which is not enough to keep up with inflation. However, given the increase in hours, average weekly earnings were up 0.7 percent, which should be enough to beat inflation.

 — Bob Stein is senior economist with First Trust Advisers.


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