November Jobs Numbers Beat Expectations
Guest blog by Dr. Tom Cunningham, Economist and MST Advisory Services, Senior Advisor- Economics
The November U.S. jobs report released December 8, shows a healthy gain of 228,000 jobs, beating expectations that were in the range of 190,000. The headline unemployment rate (U3) remained unchanged at 4.1 percent. Nor was there any significant change in the broader measure labor underutilization (U6).
We were looking to this report for a better read on the economy than the two previous months’ reports which were influenced by the jobs displaced in September due to hurricanes, then those jobs being replaced in October. Combined revisions for those two months added a net 3,000 jobs, suggesting the initial reports of those disrupted months were quite close to what actually happened.
Displaced workers from Puerto Rico may have contributed to the November numbers. That is an interesting comment on the skill mismatch in our domestic labor market. An influx of workers that are immediately employed suggests some notable pre-existing unmet demand.
Strength in this month’s report is in the usual sectors: business and professional services, manufacturing, health care, construction, and retail trade. Other major sectors were essentially unchanged. Wages rose marginally for the month. Average hourly earnings are rising at a rate of 2.5 percent year over year.
We often reference “noise” in these reports, as much of the movement, or lack thereof, is relatively meaningless and doesn’t portend long-term economic performance, the kind of data you want for your CECL estimations of life-of-loan losses. As well, what’s happening nationally might not be applicable to your local economy, and a “reasonable and supportable” economic forecast, as required by CECL, could take various, even contradictory forms.
To wit, “noise” is often the underlying topic of econometrics jokes (yes, there are econometrics jokes). For example: A child gives an econometrician a series of numbers: “1, 2, 3,” then asks what number comes next. The econometrician’s obvious answer is the average of the series, so the next number should be “2.” However, there may be an autoregressive component to the series, so if the true answer isn’t “2,” it must be “3.” Of course, since the last number in the series is “3” and the average is “2,” then “1” is a pretty good answer. The number “4” is out of historical experience, so it’s a poor choice.
All in all, the U.S. Bureau of Labor Statistics’ November jobs report is a pretty good one. Our economy continues on its course of the last several years of solid, substantial growth.
Have a happy holiday!
About the Author
Tom Cunningham holds a Ph.D. in economics from Columbia University and was senior economist with the Federal Reserve Bank of Atlanta from 1985 to 2015. Mr. Cunningham serves as a consultant to MST in the creation and ongoing development of the MST Virtual Economist and is the MST Advisory economics specialist.
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