Workers’ Skill Sets Lag Job Growth

Guest blog by Tom Cunningham

The Bureau of Labor Statistics’ November jobs report turned out about as expected. Payroll employment increased by 178,000, in line with expectations of between 170,000 and 180,000. Job gains were notable in professional and business services, health care and construction. Other sectors were essentially flat. Hours and earnings were slightly down, giving back a bit of last month’s strong showing. Adjustments to the two previous month’s jobs figures were in opposing directions yielding little net change.

More notable for November is the drop in the headline unemployment rate (U3) of 4.6 percent, a substantial decline from last month’s 4.9 percent. The drop in the broader measure of labor underutilization (U6) also fell by 0.2 percentage points to 9.3 percent. While the political banter has focused on jobs, in fact the labor force is growing at a slower clip than job creation, which is why the unemployment rate is coming down, and looking forward we’re going to have to pay a lot more attention to the problem of skill mismatch.

The drop in unemployment also will encourage the pro-rate hike group at the Fed. Taken with other recently released data, in particular good consumer numbers, the economy appears to be in good shape. There is nothing in these numbers that would dissuade the rate-hike contingent in the upcoming FOMC meeting.

Looking back over 2016, the year wasn’t as strong as 2015 in terms of job creation, but still good. Still, there is a serious appetite for change among the electorate. Figuring out what exactly to do and then doing it will be difficult, and as the process unfolds it will create a lot of noise and uncertainty, the two of which combine to make long-term investment decisions difficult.

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. Tom will be a featured speaker at the 2017 National ALLL Conference in May. 

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