November 2, 2012
At first glance, the Friday jobs report looks like a mixed bag for the economy and the presidential election. Payrolls increased by 171,000 in October—eclipsing Wall Street projections by 46,000 jobs—but the unemployment rate ticked up by one-tenth of a percentage point to 7.9 percent.
But sift through the data released by the Bureau of Labor Statistics and several intriguing trends emerge: the rebound in government employment, signs that the fiscal cliff has not hampered hiring, as claimed by business, and the increase in part-time employment.
The political response was entirely predictable. Republican Mitt Romney released a statement calling the increase in the unemployment rate “a sad reminder that the economy is at a virtual standstill.
“The jobless rate is higher than it was when President Obama took office,” Romney said. “On Tuesday, America will make a choice between stagnation and prosperity.” The unemployment rate was 7.8 percent when Obama became the president in January. But Romney himself told CNBC in July that it’s only fair to judge a president’s record after six months to a year in office—enough time for an administration’s policies to take effect.
By that standard, Obama can claim a meaningful—though lackluster by historical standards—drop in an employment rate that peaked at 10 percent four years ago. Despite the departure of discouraged workers from the labor force over the past four years that helped make that drop in the unemployment rate possible, the White House interpreted the October figures as a sign of steady progress.
“It is critical that we continue the policies that are building an economy that works for the middle class as we dig our way out of the deep hole that was caused by the severe recession that began in December 2007,” Alan Krueger, chairman of the White House Council of Economic Advisers, said in a blog post. “Over the last 12 months, the economy has added a total of 2.1 million jobs, as compared to 1.9 million over the preceding 12 months.”
The unemployment rate increased largely because the labor participation rate rose to 63.8 percent from 63.6 percent rate, an influx of workers back into the economy that was greater than the jobs gains traded slightly lower on Friday morning, with the Dow Jones Industrial Average down 43 points, or 0.33 percent.
The economy in October surpassed the average of 156,900 new jobs a month so far this year. That indicates that the consequences of the fiscal cliff—a mix of tax hikes and spending cuts that’s slated to begin next year unless a deal can be brokered between Capitol Hill and the White House—have yet to be entirely felt.
Friday’s report also revised upward employment figures from August and September by 84,000, mostly because government payrolls were updated to show an additional 55,000 jobs, a suggestion that the drag on the economy caused by the publicrivate sector is easing. But the additional hiring has not increased hourly wages—which were flat in October.
“For production and non-supervisory workers, the wage situation is even more restrained, with average earnings up only 1.1% in the past year,” Kevin Logan, chief US economist for HSBC, wrote in a client note. “This is the smallest increase in wages on record for the data going back to 1964.”
Logan also observed the shocking increase in part-time workers from the employment report’s household survey. The number of part-time employees for “economic reasons” has grown by 300,000 over the past two months to 8.3 million.
“This is a sign that some of the recent hiring spurt has been related to increased part-time work,” Logan said, “perhaps because firms are not yet confident enough about future demand to keep workers on full-time.”