Cogito Ergo Non Serviam
US Economy Added 210,000 Jobs in November
The US Non-Farm Payroll report came out a few minutes ago, and the economy added 210,000 jobs in the month of November. The unemployment rate (U3 officially) fell to 4.2% from 4.6% in October. The participation rate is at 61.9% up from 61.6%. The economy is still about 4 million jobs short of where it was before the pandemic, but GDP is above pre-pandemic levels meaning productivity has shot up. Inflation, therefore, is not a long-term risk from rising wages. Despite the headline number, this is a good report for the US, and the headline number itself is somewhat suspect.
The 210,000 jobs is tolerable and then some. During the Trump years before the pandemic, the US economy added on average 185,000 jobs a month or so. In the last 3 years of the Obama presidency, the figure was 225,000. So, the current figure would be right in that range, and all would be ticking over nicely except for the pandemic's effects on the economy that began 21 months ago.
One of the lesser-known effects of the virus has been its effect on the ability of the Bureau of Labor Statistics to count jobs and joblessness. The note that accompanied the April 2020 report (issued May 8, 2020) stated, "In the establishment survey [the report in question and not the Household Survey][, workers who are paid by their employer for all or any part of the pay period including the 12th of the month are counted as employed, even if they were not actually at their jobs. Workers who are temporarily or permanently absent from their jobs and are not being paid are not counted as employed, even if they are continuing to receive benefits." In other words, the BLS was counting pandemic job data using pre-pandemic methods.
As a result, there have been significant revisions to the jobs numbers for several months now. August, September and October all saw significant undercounting that the BLS fixed with revisions in later reports. Many believe something similar may have happened with the headline number here. Steve Liesman of CNBC (a veteran of financial journalism for decades) said he simply didn't believe the establishment survey results. Austan Goolsbee of the University of Chicago and former Chief Economic Advisor to President Obama agreed, suggesting that the way business start-ups are counted may have left as many as 500,000 people being missed in the survey. Next month, the 210,000 reported to day will be revised; this journal expects an increase of at least 75,000.
Among economists and other members of the chatterati, there is an unfortunate urge to measure the current condition of the economy against pre-pandemic norms. This journal takes the view that many of those norms just do not apply anymore. For instance, the participation rate before March 2020 was 63.3%. The current measure has that figure at 61.8%, a noticeable difference. Given the changes the pandemic brought (forced entrepreneurism, early retirement options, lack of child care for some workers, etc.), on doubts if 63.0% is even a realistic target anymore.
Indeed, when one digs down into the figure, the participation rate of prime age workers (those 25-54) is at 81.8%, more than a point below where it was before Covid came to town. This indicates that there has been some permanence to the lower rate overall. When the prime age rate is off by about as much as the over-all rate, one can conclude this is a structural issue. The new normal includes a lower participation rate.
Looking ahead, the November results will be revised upwards. The Omicron variant and the winter virus season will make December through February difficult to forecast. By April, though, one expects a boom that the Fed may have to dampen with an end to bond purchases and possibly with interest rate increases.
As before, the condition of the virus will continue to drive the condition of the economy.
© Copyright 2021 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Ubuntu Linux.
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