A Puzzling Jobs Report

There were overwhelming expectations that Hurricane Sandy and other factors were going to lead to a dismal November jobs report but that didn’t happen. Instead, the BLS reported an employment increase of 146,000 in November not stellar but certainly consistent with a continuing recovery. Sandy seems to have had an impact primarily in terms of pushing people into part-time work rather than having them register as jobless. But we really will have to wait and see how revisions and next month’s data looks.

My pre-release plan was to say we should ignore the November initial report due to Sandy factors and instead focus on the revisions. The news in the revisions is disappointing but hardly terrible: “The change in total nonfarm payroll employment for September was revised from +148,000 to +132,000, and the change for October was revised from +171,000 to +138,000.” These are the kind of employment increases that should keep the unemployment rate falling very slowly, and will make it extremely difficult for large classes of workers to see any pay increases. But I think it may be more-or-less the fastest kind of recovery that current Federal Reserve policy will let us have. A bit more inflation-tolerance might let growth proceed faster, or else a miraculous productivity surge might arrive, but I don’t believe we should expect any acceleration.

That sounds a bit gloomy, but it’s consistent with my preelection view that the winner is going to be very lucky. If the economy just keeps chugging along adding an average of 135,000 jobs per month then that’ll mean almost 6.5 million new jobs over the course of Obama’s second term.

A fascinating aspect of this jobs report is that the housing recovery is nowhere in sight. Rising new home starts are not being matched by any increase in construction employment. Something is probably being mis-estimated here, since I don’t think the houses are being built by robots, but we’ll have to see.