Job Market Looks Brighter but Still Puzzling

The U.S. unemployment rate ticked downward in November and businesses cut fewer jobs than in previous months. But is the devastated American jobs market really near the point of a turnaround? The numbers tell an uncertain story.

Unemployment fell to 10 percent last month from 10.2 percent in October, and nonfarm payrolls declined by 11,000, just a tenth of the pace of job losses recorded a month earlier, the Labor Department said Friday. While manufacturing and construction jobs continued to disappear at a disturbing rate, accelerated hiring from temp services and in the health-care industry made up for much of the losses in other areas.

No economic statistic carries more political significance than employment, and President Barack Obama was quick to trumpet a report that painted a brighter picture than the one he confronted just a day earlier, when a White House "job summit" featured bleaker forecasts and when unemployment was a dominant theme at hearings on Capitol Hill.

"This is good news, just in time for the season of hope," the president told a forum of workers, small-business owners and students in Allentown, Pa. He called the report a "hopeful sign" that the administration's and Federal Reserve's efforts to bail out the banking and auto industries, unfreeze credit markets and prop up the housing market are turning the economic tide.

While Obama called the report part of a positive trend line and a "sign that there are better days ahead," he also warned there would be gyrations in the months to come -- a safe bet considering the equivocal data in the labor report.

For one thing, 10 percent is still an awfully high unemployment rate. But even that bottom line plays down the number of jobless across the U.S. The Labor Department's seasonally adjusted household survey pegged the number of people no longer considered in the work force -- meaning they don't count when the unemployment rate is calculated -- at 82.9 million, up 291,000 in November. That includes the category of discouraged workers -- people who aren't looking for work because they don't believe jobs are available for them -- who now stand at 861,000, up from 608,000 a year earlier. And the number of long-term unemployed, people without a job for 27 weeks or longer, rose by 293,000 to 5.9 million.

The separate establishment survey of businesses large and small, often a more accurate reading of the employment situation, produced the sum of 11,000 net job losses from American payrolls. This is indeed an encouraging number, considering the average number of payroll jobs cut from August through October was 135,000 a month.

And though hiring of temp workers seemed to be a big factor in the deceleration of job losses, slight increases in the number of hours worked per week and average wages for workers in the private sector were also a good sign.

Yet the positive payroll trend doesn't square with some other important government data, including the count of new weekly claims for unemployment insurance, which suggests workers are still losing their jobs at a painful rate. The Federal Reserve's tracking of how much U.S. industry is using its current workforce and plants also suggests there is plenty of more room to trim payrolls.

Part of why Friday's labor report generated so much excitement is that many economists were looking for another bad month.

Stephen Stanley of RBS called the new report a "game-changer," and RDQ Economics said it "should reduce anxieties," while Paul Ashworth of Capital Economics declared "the economic recovery may be gathering momentum" and Naroff Economic Advisors simply said "Wow!" as a Wall Street Journal collection of comments shows.

But it's important to remember that most economists also didn't publicly foresee such a terrible downturn in the first place. And when the employment situation finally turned around after the last recession earlier this decade, that caught them by surprise as well.