Mixed Signals on Economy as Unemployment Rate Drops

Mixed Signals on Economy as Unemployment Rate Drops

U.S. employers added a disappointing 210,000 jobs in November, the Labor Department announced Friday, falling well short of expectations for 500,000 or more new hires. At the same time, the unemployment rate fell to a 21-month low of 4.2%, even as more workers returned to the labor market, a positive sign for the strength of the jobs recovery.

Economists emphasized that the hiring numbers and the unemployment rate come from two different surveys, the first focused on businesses and the second on households. The large divergence between the two last month suggests that one of them is missing out on some key data, which will be corrected in future revisions – quite likely to the upside for the job numbers.

“The odds are good that the November total is being underreported — as happened nearly every other month this year,” says The Washington Post’s Phillip Bump, who notes that 2021 has seen an unusual number of large upward revisions, with the economy adding nearly 1 million more jobs this year than initially reported.

Biden talks up report: Not surprisingly, the White House is emphasizing the good news in the unemployment rate, which fell four-tenths of a percentage point from the month before, and avoided talking about the raw job numbers.

“Today we got the incredible news that our unemployment rate has fallen to 4.2%,” President Joe Biden said Friday. “At this point in the year, we’re looking at the sharpest one-year decline in unemployment ever. Simply put, American is back to work and our jobs recovery is going very strong.”

Many analysts agree with the more upbeat assessment, saying that the payroll numbers tend to be noisy. “Don't be fooled by the measly payroll jobs gain this month because the economy's engines are actually in overdrive as shown by the plunge in joblessness," Christopher Rupkey, chief economist at FWDBONDS, told Reuters.

Still, the labor market has a long way to go until it recovers all of its pandemic losses, and that could be a problem for Biden and for Democrats as they head into an election year. According to economists Jason Furman and Wilson Powell III, the U.S. economy is still 5 million jobs shy of the pre-pandemic trend – and the Omicron variant of Covid-19 could make it that much harder to close that gap.