Today’s employment report is good news:
- Only 11,000 net jobs were lost in November. Given the margin of error on this data, that’s basically equivalent to zero.
- The unemployment rate declined from 10.2% in October to 10.0% in November.
- Data for September and October were revised upward. The U.S. economy still lost jobs in those months, but fewer than previously estimated.
The graph below shows the employment level – the number of people working in the U.S. according to the payroll survey. You can see that the line has flattened out in the past month. That’s a good thing.
At the same time, you can see how much slack there is in the economy. We’re down 7.156 million jobs from the peak in December 2007 (the blue dot), and down 3.337 million jobs since President Obama took office in January 2009 (the red dot).
Here is the graph for the unemployment rate. You can see the rate has turned down over the past month. That, too, is good news.
Regular readers will remember that there are several useful job growth markers. The first is for job growth to begin. We can further subdivide that into two components: first the job decline needs to stop, then job growth needs to begin. It appears the job decline has essentially stopped, although most economists whom I trust will wait for a second month of data to confirm it. Now we need job growth to begin.
After job growth begins, the next marker is when job growth exceeds about 150K jobs per month. That’s a good rule-of-thumb number for when we should expect to begin to see steady declines in the unemployment rate.
The final marker is full employment. We obviously have a long, long way to go before reaching that point. I use 5.0% as my rule-of-thumb for full employment. With today’s workforce of about 154 million people (in the household survey), we’d need to create about 7.7 million jobs starting now to return to full employment. And since the labor force generally grows over time, by the time we get there it’ll probably be around 8 million above today’s levels. That’s a lot of new jobs we need the economy to create.
I’d like to suggest five takeaway points for you:
- Today’s report is good news.
- We should wait for one more month of data to confirm today’s report before concluding that job declines have ended.
- The picture has flattened out, but has not yet turned upward. In political rhetoric, if next month’s data confirms today’s data, we will no longer be “headed in the wrong direction.” We won’t be “headed in the right direction” until the top graph turns up.
- Once job growth has broken zero, the next threshold is +150K jobs per month. That should roughly coincide with a declining unemployment rate.
- We have a longway to go:
- We need the economy to create 3.3 million jobs to get back to the employment level when President Obama took office.
- We need it to create 7.2 million jobs to get back to our previous high in December 2007.
- We need it to create about 8 million jobs to get back to full employment.