U.S. Unemployment Numbers Not What They Seem
If you only read the headlines (like most Americans, it seems), the U.S. economy is on fire.
In November, the U.S. economy added 178,000 jobs. This helped the unemployment rate plunge to 4.6% in November from 4.9% in October. This is the lowest level since August 2007, before the 2008 financial crisis. (Source: “Employment Situation November 2016,” Bureau of Labor Statistics, December 2, 2016.)
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The drop in the unemployment rate was a result of new jobs and partly a result of Americans retiring or otherwise leaving the workforce. This would suggest that the U.S. economy is in great shape as President-elect Donald Trump gets ready to take office.
Or rather, it is evidence that President Barack Obama has been at the helm of the greatest economic recovery since the Great Depression. If I was Obama, I wouldn’t want to seize November’s unemployment data to use on my post-presidential resume.
The fact is, the recent numbers just don’t support the case that the U.S. economic recovery is a success and that the broader U.S. economy is in good shape. The unemployment rate is down at such a nice number because the number of Americans not in the labor force jumped in November by 446,000 to a record 95.1 million. (Source: “Employment Situation Summary Table A. Household data, seasonally adjusted,” Bureau of Labor Statistics, December 2, 2016.)
The labor participation rate hit 63% in March, but it’s been unable to surpass that level since then. It came in at 62.9% in September, fell to 62.8% in October, and was down to 62.7% in November; a little off the all-time low of 62.4% in October 2015. This shouldn’t be a total surprise when you look at the huge increase in the number of Americans who are no longer in the workforce.
This pushed the U.S. civilian labor force down by 226.0 million to 159,486,000. This ultimately helped pull the unemployment rate down to 4.6%. Toss in the number of unemployed Americans to those not in the workforce, and there are now more than 102.0 million Americans who are either unemployed or stopped looking for work.
Add it up, and the underemployment rate is 9.3%.
Waiters and Waitresses in High Demand
But what of those jobs that were created? After all, you can’t deny that President Obama has helped many Americans land on their feet with a much-needed job!
The sector that added the most jobs was “Professional and business services,” with an increase of 63,000 jobs. Health care employment was up by 28,000 in November, and construction employment was up by 19,000. (Source: “Current Employment Statistics,” Federal Reserve Bank of St. Louis, last accessed December 2, 2016.)
These are typically higher-paying jobs, but it’s important to keep in mind that, while unemployment was down, so too was wage growth. On a year-over-year basis, wage growth was just 2.5%, which is significantly lower than the 3.8% when the unemployment rate last hit 4.7%.
Waiters and waitresses continue to be in high demand, with 18,900 “food service and drinking places” jobs created. These are low-paying jobs that rely on tips. Not a great combination in this economic environment. Some of those waiters and waitresses may have come over from the retail sector, which fell by 8,000 month-over month to 15,976.
And, of course, there was an increase in taxpayer-funded government workers, which increased by 22,000 in November, a significant jump from the 7,000 such jobs created in October and the 1,000 created in September.
It wasn’t all good news though; manufacturing jobs fell by 4,000 in November. In October, the manufacturing sector shed 5,000 jobs. Over the last two years, the U.S. economy has made room for 571,000 waiters and waitresses and lost 34,000 manufacturing jobs.
U.S. unemployment numbers may be near historic lows, but it isn’t because the U.S. economy is creating well-paying, skilled jobs. Wage growth is down and the demand for low-paying, part-time jobs is up.
This isn’t the best jobs mantle that Trump could be handed.
Happy holidays.
