If this is what happens when the government is temporarily shut, we’d vote for making it permanent. Payroll growth easily beat consensus expectations in November, rising 204,000 for the month, and 264,000 when you include upward revisions for August/September. Private-sector payrolls expanded 282,000, including revisions to prior months.
However, there are differences in the timing and design of the payroll survey and civilian-employment (“establishment”) survey that negatively affected figures from the latter report: Civilian employment, an alternative measure of jobs that includes small-business start-ups, fell 735,000 in November, and the labor force dropped 720,000. As a result, the unemployment rate ticked up slightly to 7.3 percent. We expect the big declines in the labor force and civilian employment to reverse next month, now that the shutdown is over.
Not all the data in the payroll survey were as strong as the headline number on job growth. Average hourly earnings were up only 0.1 percent and weekly hours per worker ticked down to 34.4 from 34.5. But earnings per hour are still up 2.2 percent from a year ago, while total hours worked are up 2.4 percent. As a result, total cash earnings are up 4.6 percent in the past twelve months, or up about 3.5 percent adjusted for inflation. This is more than enough for workers to keep pushing up spending.
Also, once again a new report destroyed one of the recent negative stories about the job market: Data on part-time work is very volatile from month to month; part-timers fell dramatically late in 2012 and then rebounded sharply in early 2013. As a result, some pessimistic analysts (inappropriately) ignored the major drop in part-time work late in 2012 and fixated on the numbers starting in January to argue that most of the growth in jobs “so far this year” was due to part-timers. But part-timers fell 57,000 in October and are now down 346,000 versus a year ago.
In sum, we and most everyone else were pleasantly surprised by the strength in payrolls. The civilian employment numbers were weak but should bounce back next month. The labor market is still lagging the improvement it would be showing if public policy were better, but it’s still moving in the right direction. The next couple of reports should tell us if it’s picking up its pace.