In opening last Thursday’s jobs forum, President Obama told the assembled guests that he wants “to take every responsible step to accelerate job creation.” Pragmatic in his assessment of the meeting’s potential to produce outcomes in the short term, he added that “we won’t overcome our unemployment challenge in just a few hours this afternoon.”
As it turns out, he may have needed only until the next morning.
The Bureau of Labor Statistics released the Employment Situation report for November on Friday. According to its preliminary estimate, employers cut payrolls for the 23rd consecutive month in November, by 11,000 jobs. But the consensus estimate had called for a net decline of 100,000 jobs. Besting expectations, headline job losses in November narrowed to their lowest level since the beginning of the labor market contraction, in January 2008. Since November’s job losses fall within the report’s margin of error, the labor market may have expanded over the month.
Corresponding with the smaller contraction in payrolls, the report’s Household Survey shows that the unemployment rate, while remaining at its highest levels since 1983, fell from 10.2 percent in October to 10.0 percent in November.
Dig. Now Dig Deeper.
Behind the headline result, a net loss of 69,000 jobs in goods-producing industries was almost fully offset by a net increase of 58,000 jobs in services employment. Jobs were created in professional and business services; education and health services; and government employment. Even after controlling for a net increase of 7,000 government jobs, private payrolls fell by just 18,000 jobs in November. Apart from November’s results, October’s job losses were revised from a decline of 190,000 to a decline of 111,000; September’s, from a decline of 219,000 to a decline of 139,000. Together, these revisions returned 159,000 jobs to payroll estimates for September and October.
In spite of the upside surprise in the November count and the positive revisions to September’s and October’s estimates, the market’s response to the report was mixed. The Dow Jones Industrial Average inched up by 0.22 percent in the day’s trading; the NASDAQ, by 0.98 percent. For the week, both indices were slightly higher. Anticipating that a rate increase may be in the offing, Treasuries fell and the dollar spiked on a rise in bets that the Fed will now tighten monetary policy sooner than expected. The dollar’s gain against the yen was the largest in more than 10 years.
The market’s muted reaction to the report reflects an appropriate degree of skepticism. Digging further into the report, the counterweights to the favorable headline numbers become apparent. Viewed through the lens of the commercial real estate professional, the reasons for a cautiously optimistic assessment of the report are writ large.
Who Is Unemployed?
The rolls of unemployed Americans fell by 325,000 persons in November, from 15.7 million to 15.4 million. As compared to the March 2007 low point, the unemployment count has risen by 8.6 million persons. The labor participation rate, which captures the share of the civilian population that is employed or seeking employment, slipped from 65.1 percent to 65.0 percent over the month.
The 10 percent unemployment rate captures the share of individuals of the labor force who are seeking employment. Because some people will drop out of the labor market as conditions worsen (this is reflected in the lower participation rate), the unemployment rate tends to underestimate the severity of the labor market’s downturn. Including these marginally attached workers and persons working part-time for economic reasons, the alternative measure of labor underutilization in November was 17.2 percent, down from 17.5 percent in October.
Among its many dimensions of variation, some of the most striking differences in unemployment rates are across race. The unemployment rate for whites fell from 9.5 percent in October to 9.3 percent in November. The unemployment rate among blacks fell as well, from a revised 15.7 percent to 15.6 percent; among Hispanics, from 13.1 percent to 12.7 percent. The unemployment rate for Asians remains relatively lower than for other groups, slipping from 7.5 percent to 7.3 percent (note that the unemployment rate for Asians is not seasonally adjusted) over the month.
Unemployment rates exhibit even greater variation across educational attainment but were generally lower than in October. For persons with less than a high-school diploma, the unemployment rate fell from 15.5 percent to 15 percent. At the other extreme, the unemployment rate actually increased for persons with a bachelor’s degree or higher, from 4.7 percent in October to 4.9 percent in November.
Dominant apartment renter groups face continuing challenges in finding work, undermining demand for multifamily housing. For adult heads of household younger than 25, the unemployment rate jumped another 50 basis points between October and November, rising from 15.6 percent to 16 percent. The absence of new jobs for recent graduates and other young people has resulted in a sharper increase in the unemployment rate for these groups. Without jobs and the resulting income streams, younger Americans demonstrate a lower propensity to form new households. Some move home after college; others double up. In both cases, a keystone of rental demand softens, resulting in lower apartment occupancy and rental rates.