The Corner

The November Jobs Report: An Early Christmas Gift?

The November report was a very early Christmas gift. Job losses were only 11,000, and the unemployment rate declined. There are strong signals that job growth could turn positive very shortly. First, the weekly number of hours worked and overtime worked jumped. Second, the temporary-hiring sector expanded for the fourth month in a row, for a total of 200,000 new jobs since July. This is a strong indication that the labor market has bottomed out and the recovery is occurring. Finally, job losses from October and September were revised downwards by 160,000, indicating that those months were much better than previously thought.

Most attention will be focused on the fact that the unemployment rate fell from 10.2 percent to 10 percent.  However, the unemployment rate fell because many people dropped out of the labor force entirely. Teenagers, who have the highest unemployment rate, were the most likely to leave the labor force. High-school dropouts and high-school graduates also left the labor force, and these groups also have high unemployment rates. The drop in the unemployment rate is due to these groups leaving the workforce. The unemployment rate will climb once more workers return to the labor force, so it is very likely that the unemployment rate will continue to climb well into 2010.

The sourest news was that unemployed workers continue having difficulty finding new jobs. The number of long-term unemployed — those out of work for more than six months — increased by 293,000, and the average and median length of unemployment both increased by about one and a half weeks.

Still, this is very good news for the labor market. We know that the mass layoffs and firings ended in early spring. This report indicates that the next step in the recovery is commencing. Employers are starting to hire new workers in a variety of new fields, as seen by the strong growth in professional and business services.

The question now will be how strong the recovery is. It is not a good climate for entrepreneurs with tight credit markets, higher taxes, and more regulation, courtesy of the federal government. Small-business startups and job creation is far behind previous recoveries. It remains to be seen if employment growth will be robust enough to return to unemployment rates below 6 percent.

Rea Hederman Jr. is assistant director of the Center for Data Analysis and senior policy analyst at the Heritage Foundation.

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